The dramatic revision to Australia's population estimates will aggravate the nation's chronic shortfall of available housing, increasing the urgency to build more homes, an industry group said today.

In a report released this week, the Treasury estimated there will be 35 million people in Australia by 2050, 20 per cent higher than previous estimates.

That means 70,000 new homes will have to be built a year to accommodate the population growth, the Housing Industry Association said today.

"Already Australia has a substantial gap between the supply of dwellings and the underlying demand for dwellings," said HIA deputy managing director Shane Goodwin. "The gap is set to widen further with obvious consequences for house prices, rents and affordability."

Before the revisions to Australia's population estimates, HIA estimated the shortfall between underlying demand and supply of homes to hit 56,600 in 2009.