Builders warn fuel and supply shocks could add to inflation pressures
The price of building a new home rose 3.7% in the year to February 2026, the quickest annual increase since October 2024, according to inflation figures released by the Australian Bureau of Statistics (ABS).
Industry body Master Builders Australia said the data indicated that residential construction costs were already gathering pace even before the outbreak of conflict in the Middle East, and that recent developments were likely to intensify cost pressures for the sector.
Shane Garrett (pictured below left), chief economist at Master Builders Australia, noted that housing remained the largest driver of inflation nationally.
“During February 2026, new home building costs surged to a 16-month high while rents have grown by 3.8% over the past year,” Garrett said. “Material cost increases in the past fortnight could push the cost of all building even higher including residential and non-residential, with further shortages of vital products including plastics expected.
“Surging diesel prices and the disruptions to the building material supply chain are impeding builders, suppliers, manufacturers and subcontractors. Over the past four weeks, moving building materials and workers around has become much more expensive.”
Denita Wawn (pictured above right), chief executive of Master Builders Australia, said current volatility and its potential effect on inflation and the industry’s workforce underscored the importance of the coming federal budget.
“As we have outlined in our pre-Budget submission, red tape reduction, investment and apprenticeship incentives and increased infrastructure spending are all needed if we are to meet the National Housing Accord target and improve affordability,” Wawn said. “In response to the current economic uncertainty, builders need flexibility from government and private sector clients around completions dates and, where possible, contracts need to facilitate the sharing of the impact caused by unexpected cost increases outside the builder’s control.
“Builders need our backing and with building and construction, particularly the civil sector, being a major user of fuel and diesel, it must be a priority for decision makers in terms of ensuring supply.
“If home and infrastructure building stalls, we risk falling even further behind on the pipeline of works before us. Now is the time for measures that increase housing supply, and the federal budget must deliver.”
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