Australia’s peak residential building body has called on the federal government to extend fuel excise relief beyond 30 June, warning that its removal could add further pressure to housing construction costs at a time when the industry is already facing rising expenses and housing supply challenges.
The Housing Industry Association (HIA) said the scheduled end of the temporary fuel excise relief and pause on heavy vehicle road user charges risks pushing up diesel costs and increasing expenses across the residential construction sector.
The call comes just days after easing tensions in the Middle East and a reported agreement between the United States and Iran helped lower global oil prices, raising expectations that inflationary pressures linked to fuel costs could begin to ease.
HIA Managing Director Jocelyn Martin said builders were still absorbing earlier increases in construction costs and had limited capacity to take on additional expenses.
“Home builders are still absorbing the last wave of material price hikes into fixed-price contracts. They simply don’t have the capacity to take another hit,” Ms Martin said.
“Fuel excise relief has been critical in containing costs across the construction supply chain. Removing it now, while diesel prices remain elevated, will push costs higher again.”
The temporary fuel excise reduction was introduced earlier this year in response to rising fuel prices linked to disruptions in global energy markets. The measure is due to expire on 30 June.
HIA said the end of the relief would lift diesel costs by more than 10 per cent, with the impact expected to flow through transport, logistics and construction activity.
“Fuel is a core input – from earthmoving equipment and freight to tradies moving between jobs. When fuel costs rise, everything rises,” Ms Martin said.
“Changes in fuel costs flow through to many parts of the home building process and contribute to the overall cost of delivering new housing.”
The warning comes as the construction sector prepares for a range of changes from 1 July, including a 4.75 per cent increase in award wages, housing-related tax measures announced in the federal budget and updated superannuation obligations.
Housing supply remains a major policy focus as governments seek to increase the number of new homes built across the country amid ongoing affordability concerns and strong population growth.
HIA said policymakers should consider the effect of transport and logistics costs on housing delivery as Australia works towards its target of building 1.2 million new homes.
“At a time when Australia needs 1.2 million new homes, the policy settings are moving in the wrong direction,” Ms Martin said.
“Treasury’s own modelling points to 35,000 fewer homes being built over the next decade directly due to the federal budget decisions.
“Government cannot afford to pile further costs onto an industry already under severe strain.”
The association acknowledged longer-term infrastructure commitments contained in the federal budget but argued these measures would do little to reduce immediate cost pressures facing builders.
“The industry needs relief now, not in a decade,” she said.
“A further three-month extension of fuel excise relief is a practical, short-term measure that would help the industry absorb existing cost increases and avoid another price shock.
“Letting it lapse risks delivering another avoidable shock to builders, tradies and ultimately home buyers.
“While fuel costs represent only one component of overall construction costs, they remain an important consideration for businesses involved in the delivery of new housing and residential infrastructure.”
The federal government has indicated the fuel excise relief was intended as a temporary measure and has not signalled any plans to extend it beyond the end of June.
The debate comes as the Reserve Bank weighs inflation risks, housing activity slows in parts of the country and policymakers continue searching for ways to increase housing supply while managing cost-of-living pressures.
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