The prime minister is wants to seize urban planning powers that are usually the preserve of state governments and local councils, in a bid to improve public transport and housing options as the nation’s population burgeons.

Kevin Rudd plans to withhold infrastructure funding from states and councils that refuse to comply with a national planning criteria, which could cover transport, housing development and land release.

The prime minister’s reach could extend to insisting upon “world class design and associated architectural integrity”, he said in Sydney last night.

In a speech to the Business Council of Australia, Rudd said he would pursue the urban development agenda next year through the Council of Australian Governments (COAG).

Industry groups welcomed the move. National planning criteria was “prudent” given the population explosion forecast for Australia’s cities, Infrastructure Partnerships Australia (IPA) executive director Brendan Lyon said.

“The quality of long-term infrastructure planning is highly variable across Australia’s states. National planning principles reflecting global and national best practice could help all of Australia’s states get it right on infrastructure,” Lyon said.

State governments have been “hampered for years” by a lack of federal funding and the proposed move could be a “once-in-a-lifetime opportunity” to improve capital cities, the Housing Industry Association’s (HIA) deputy managing director, Shane Goodwin, said.

“Closer integration of housing development with the provision of social and economic infrastructure in a path-breaking Commonwealth-state agreement offers the greatest opportunity for Australia to restore housing affordability by breaking the shackles of chronic housing shortages,” Goodwin said.