In the face of the continuing escalation of the cost of building materials and supplies, Master Builders Victoria (MBV) says it is disappointed that the Victorian Government has not moved to support a measure that would allow builders to share some of those cost increases with their clients.   

MBV, does however welcome, the Government release and its response to an investigation into supply chain challenges by the Commissioner for Better Regulation and Red Tape Commissioner, Anna Cronin, where it supported nine out of 10 key recommendations. 

Amongst the nine recommendations endorsed by the Victorian Government today are commitments – particularly in relation to timber shortages - to support: 

  • The sourcing of any surplus timber held in storage or any mature softwood timber due for harvest
  • The development of further softwood plantation projects
  • Increased use of steel house framing
  • Further research and development of new building materials   
  • Better communication materials to improve consumer awareness of the complexities and time and price impacts of the supply chain shortages  

MBV Acting CEO Michaela Lihou said while MBV warmly welcomed the adoption of nine of the recommendations in the Commissioner’s report, an ongoing issue for many struggling builders was their current inability to share some of the financial impacts of their contract cost blowouts with their clients.  

“We had hoped that the Victorian Government would support the inclusion of a cost escalation clause into new contracts, which effectively allows builders to vary a contract price to reflect these unprecedented increased costs of labour and materials, rather than being locked into a fixed price agreement when increased costs are beyond their control,” she said. 

However, in its report today the Government rejected the recommendation relating to contracts below $500,000 arguing ‘the Building Contracts Act 1995 is designed to protect consumers and including a cost escalation clause would fail to protect their interests’. 

And adding that ‘Considering that the current challenges are now well known to the sector, appropriate provision for price increases in materials can now be factored into the cost estimates for new domestic building contracts.’ 

Despite this, Ms Lihou acknowledged the Victorian Government’s agreement today to undertake further work on this important issue by establishing a Residential Construction Costs Working Group.

“The Victorian Government has confirmed to us that MBV will be a part of this working group to continue the discussion on the challenges that rising construction costs has had on our industry and consumers, and further identify measures to mitigate its impact,” she said. 

Supply shortages and the ever-increasing costs of key materials, such as timber and steel, have been two of the most pressing issues facing the building and construction industry over the past two years. 

The cost of building a new home rose by 20 per cent in 2021 and the Federal Government has just imposed a 35 per cent tariff increase on imports from Russia and Belarus, and while these countries account for a small portion of Australia’s timber imports, it will impact the price of laminated beams used as structural supports in new house constructions.  

A survey last year on material shortages by Master Builders Australia revealed that 98 per cent of Victorian builders had been affected by delays and price rises, with wait times for some materials blowing out to six months. 

MBV had put the request for an investigation into the issue to the Victorian Government in 2021 and Victoria has been the only state to commission such a report. 

“We thank the Victorian Government for commissioning this report and understand its caution about any potential risks for consumers in contract variations.  However, Victorian builders are consumers with families as well, and it’s vital that everyone continues to work together fairly in these unprecedented times.” 

“These nine recommendations will go some way to help relieve pressure on the building and construction industry and we thank the Victorian Government for its support, but we still need to arrive at a fair and equitable solution to these unavoidable costs blowouts and Master Builders Victoria will continue to advocate for a solution for our members.” 

Click here to view the Supply Chain review Report.

AVAILABLE FOR INTERVIEW: MBV Acting CEO Michaela Lihou 

MEDIA ENQUIRIES: Leigh McClusky 0411 711 780