Australia's construction industry faces another crisis: fuel. With global tensions driving petrol and diesel prices to record highs, the nation's peak body for the building and construction sector says the industry is "increasingly alarmed" about higher costs, according to Master Builders Australia CEO Denita Wawn.
Fuel price rises have the construction industry bracing itself for a repeat of the COVID-19 era, during which supply chain disruptions drove up costs. The timing could not be worse. The government is aiming to build 1.2 million homes in five years, but a new report predicts a 380,000 new dwelling shortfall. Wawn stressed that transport and material cost increases and disruptions to the building supply chain will hinder efforts to meet the National Housing Accord target, saying that higher costs for builders will harm productivity and affordability at a time when we need a dramatic increase in housing supply.
Since the start of the Accord, a 75,000-home backlog has already accumulated, and unless the federal government pulls the correct policy levers, recent events are likely to worsen the home building situation even further, according to Wawn.
Wawn is urging the government to step in early and consider a fuel carve-out for the building and construction industry, saying that if fuel rationing has to occur for the betterment of the country as a whole, building and construction has to be included.
The request reflects genuine desperation in the sector. Diesel is the preferred fuel in the construction sector, powering more than 75 per cent of all heavy construction equipment. Every stage of building, from excavation through to final delivery of materials, depends on reliable fuel supply. Regional Australia is particularly exposed, with many building projects outside major cities depending on long freight routes for timber, steel, concrete and prefabricated components.
The pressure comes atop existing headwinds. There were 3,596 building industry insolvencies in 2025, demonstrating the fragility of the sector, with builders and developers being forced to operate in a system that is increasingly costly and difficult. Build times have now dragged out to 12-14 months versus the pre-COVID-19 seven-nine-month period, and construction costs have exploded by 45 per cent over the last five years due to persistent labour shortages, with every day a building site sits empty becoming more expensive.
The government's response so far has been cautious. Prime Minister Anthony Albanese has not suggested fuel rationing or carve-outs for particular industries to date, instead urging calm. On Thursday, Albanese reassured Australians that fuel deliveries have not yet been disrupted and established a fuel taskforce to coordinate state and Commonwealth distribution efforts, saying fuel supply is currently secure but wanting Australia to be overprepared.
The fundamental problem remains structural. Opposition housing spokesperson Andrew Bragg says the industry has been "bogged down" by high labour and material costs for years, noting that construction costs and labour shortages were already biting before any conflict in the Middle East disrupted global supply chains, and that this has only been made worse by the current oil crisis.
On 16 August 2023, National Cabinet agreed to an ambitious new national target to build 1.2 million new well-located homes over 5 years, from 1 July 2024, an additional 200,000 new homes above the original one million homes target. Hitting the federal government's National Housing Accord target of 1.2 million new homes over a five-year period would require the construction of 240,000 homes per year. Australia commenced 60,960 fewer homes than necessary in 2024-25 to meet the government's target of 1.2 million new homes over five years.
Whether fuel rationing becomes necessary remains uncertain. What is clear is that the construction industry operates with razor-thin margins, and new cost pressures arrive at the worst possible moment. The industry's request for a fuel carve-out reflects a legitimate concern about core inputs, but it also raises a broader question about Australia's capacity to build at the scale required.