Labor calls to lift cap on home-loan deposit scheme to help construction

The cap on the number of people given access to the federal government's first home loan deposit scheme would be lifted for those building a new house or flat under a Labor plan it says would provide vital support to the struggling construction sector.

Responding to warnings from the Reserve Bank and the housing industry that the builders face a collapse in demand that could put up to 500,000 jobs at risk, Labor on Saturday said a broad plan to retain activity across the sector was desperately needed.

Labor housing spokesman Jason Clare said the government's first home loan deposit scheme, which this week reached its 10,000 annual cap, should be overhauled to benefit those people prepared to build a home.

Under the scheme, the government goes guarantor on the first-home buyers' loans, enabling first timers to get into the market earlier with as little as a 5 per cent deposit.

Under Labor's proposal, the overall 10,000 per financial year cap will be retained for those who buy an existing home. But there would be no cap for those buying new.

Mr Clare said this would encourage construction of new homes, keep more people in work and lift the stock of housing.

"We need to provide more support for the construction of new housing to help keep tradies working and off the dole queue," he said.

Between 160,000 and 171,000 homes were expected to be built this year. This has now been cut to 100,000 with fears it could drop even further next year.

Housing Minister Michael Sukkar and Treasurer Josh Frydenberg are already working on initiatives to support housing construction which is expected to struggle partly due to an 85 per cent fall in migrant numbers.

Up front grants of $50,000 for people buying a new home are being considered as well as other measures to stabilise construction.

The government is expecting a 30 per cent drop in net overseas migration this financial year before an 85 per cent fall in 2020-21.

The 2019-20 budget had assumed a net 270,000 increase in migration for 2019-20 and just a small drop the following year.

Mr Frydenberg on Friday said the government was looking at support packages for particular sectors such as housing.

"That is a sector where there is going to be a slow-down in demand, reflecting the slow-down across the broader economy," he said.

"It's not just the plumber and the sparkie and the carpenter who are employed on a building site, but it's that full supply chain; the timber mills and other suppliers into a building which are critical. So, we're looking at initiatives in that space."