Suppliers are recovering the cost of this year’s fuel shock through levies and freight charges rather than published price rises. The effect on a build is the same. The visibility is not.
Concrete suppliers applied fuel surcharges of around $8 per cubic metre in late March. By April those charges had reached about $18. In June, as diesel came off its peak, they fell back to roughly zero.
They are now back. Rider Levett Bucknall reported this month that surcharges have been reinstated at around $7 to $9 per cubic metre, with wholesale diesel close to $2.50 a litre, almost $1 above pre conflict levels.
None of that movement registers anywhere as a material price rise.
Suppliers are using levies rather than list prices
Cotality’s June quarter Cordell Construction Cost Index carried an observation that sits oddly against the volume of commentary about construction inflation. Despite the forecasts of rising building material costs, the firm reported those pressures were not yet showing up fully in observed material pricing.
Suppliers were instead recovering cost through fuel levies, freight charges, logistics fees and other surcharges rather than implementing widespread price increases. Cotality called it a waiting game, with suppliers holding back the full force of the increases until global conditions stabilise.
Altus Group reached the same conclusion from its own supplier research, describing what suppliers now hold as an on and off switch for passing fuel costs through. It has been flicked three times this year.
A published price rise is a decision that is awkward to reverse. A levy is not. That asymmetry is why suppliers prefer it in a volatile market, and it is also why a levy is harder to see coming.
What is a fuel surcharge, and how is it different from a price rise?
A fuel surcharge is a separate charge applied to a delivery or supply arrangement to recover transport and energy costs. It sits on top of the quoted price rather than changing that price, and it can be introduced or withdrawn at the supplier’s discretion, usually at short notice. A price rise changes the published rate for the product itself. Both increase the amount invoiced. Only one of them changes the number the price indexes report.
What the official numbers picked up, and what they did not
The June quarter figures from the Australian Bureau of Statistics confirm the cost pressure without showing how it arrived. Input prices to house construction rose 2.1 per cent in the quarter and 3.8 per cent over the year, the largest quarterly rise since 2022. Electrical equipment led at 7.4 per cent, with electric cable and conduit up 11.2 per cent on higher copper and PVC costs, and plaster products rose 4.6 per cent.
House construction output prices rose 2 per cent for the quarter, the largest rise since September 2022, and 5.9 per cent over the year, with Queensland up 3.1 per cent and Tasmania 4.7 per cent. The ABS noted that many builders passed fuel costs on to customers, with the cost of delivering materials placing significant upward pressure on prices.
Freight is where it shows most plainly. Road freight transport prices rose 15.5 per cent in the quarter, the largest quarterly rise since that series began in 1997, and a record 17.6 per cent over the year.
Cotality’s index rose 1 per cent nationally for the quarter and 2.8 per cent over the year. Master Builders Australia said in early September that building materials inflation had reached a three year high.
Diesel never went back to where it started
The relief that arrived through the middle of the year was real but partial. ACCC monitoring published on 11 September had average retail diesel across the five largest cities sitting 77 cents a litre above pre conflict levels of late February, and 69 cents below the late March peak. Prices rose again in the week to 9 September as the conflict escalated.
Underneath that, the tax relief has gone. The excise was halved by 26.3 cents a litre from 1 April, and that discount ended on 2 August. RLB reports the end of it has added further pressure to diesel prices.
Diesel is rarely a line item on a residential build. It arrives inside concrete delivery, plant and crane hire, earthworks, and every truck that comes through the gate.
Some of this reverses and some of it does not
The fuel linked costs are the reversible ones. They came off once this year and they can come off again, which is the pattern we set out through the middle of the year in what eased and what did not.
The structural costs behave differently. Australia raised duties on several Chinese steel products between April and May, with hot rolled coil as high as 82 per cent on Altus figures. Fabricators have been working through stock imported before those duties applied, which is why the effect has been slow to reach pricing. Altus expects it to show in tenders from this quarter.
Copper is the other one. Altus has it up 7.21 per cent for the quarter and 25.77 per cent for the year to date, driven by data centre, electrification and grid demand against constrained supply. That demand has nothing to do with the Middle East and is not waiting on a ceasefire.
A levy can be switched off in a week. A duty stays on the cost base for years.
The forecasts have split by city rather than by material
RLB modelling has the current input cost pressure adding 2 to 4 per cent to new project costs, against 4 to 8 per cent at the April peak and 1.5 to 3.5 per cent in June. Its national tender price index sits at 4.6 per cent for 2026, with Perth the only city revised up, to 6.5 per cent, and Brisbane at 5 per cent before stepping to 7 per cent a year from 2027. Altus has 2026 at 9 per cent in Brisbane, 7 per cent in Perth, 6 per cent in Sydney and 5.5 per cent in Melbourne.
Those numbers assume the work happens. Approvals and commencements have been rising while completions have not kept pace, with 51,009 dwellings commenced in the March quarter against 44,328 completed. If feasibility stops projects converting from approval to site, demand for materials softens with them, which is the main argument for cost escalation across the industry easing from here.
Where a surcharge lands in a contract
Rise and fall provisions are usually written around published indexes or nominated material rates. A delivery levy applied at a supplier’s discretion, withdrawn, then reapplied, can sit outside both. Where it does, it stays with whoever is carrying that cost through the job.
The wider point in Cotality’s data is that the full increase has not been passed through yet. A portion of the cost sitting in the supply chain right now has not been priced into anyone’s contract, on either side of it.
The Good Builder Take
The last six months have been reported as a price story. It is really a mechanism story. When cost arrives as a levy instead of a price, it moves faster than any index, it lands mid job rather than at quote stage, and it can be withdrawn and reinstated inside a single quarter without ever showing as a price rise. That is what is worth watching through to the October data, not the headline percentage.
Frequently asked questions
Yes. ABS figures show input prices to house construction rose 2.1 per cent in the June quarter 2026 and 3.8 per cent over the year, the largest quarterly rise since 2022. House construction output prices rose 5.9 per cent over the year. Cotality’s Cordell index recorded a 1 per cent quarterly rise and 2.8 per cent annually. The next ABS reading covers the September quarter and is due on 30 October 2026.
Rider Levett Bucknall reports that major concrete suppliers applied surcharges of around $8 per cubic metre in late March 2026, rising to around $18 in April, before they fell to around zero in June as diesel eased. They have recently been reinstated at around $7 to $9 per cubic metre, with wholesale diesel close to $2.50 a litre.
No. A surcharge is a separate charge on top of the quoted price, applied and withdrawn at the supplier’s discretion. A price increase changes the published rate. Both raise the invoice, but only a price increase shows clearly in the material price indexes that cost plans and rise and fall provisions are built on.
On ABS figures for the June quarter, electrical equipment led at 7.4 per cent for the quarter and 12.1 per cent over the year, with electric cable and conduit up 11.2 per cent on copper and PVC costs. Plaster products rose 4.6 per cent and aluminium windows and doors 3.2 per cent. Altus supplier data has copper up 25.77 per cent year to date and plasterboard up 9.07 per cent.
Forecasters expect escalation to slow rather than reverse. Altus has 2027 escalation at 8 per cent in Brisbane, 5.25 per cent in Perth, 4.5 per cent in Sydney and 4 per cent in Melbourne. Rider Levett Bucknall has Brisbane stepping up to 7 per cent a year from 2027. Fuel linked costs can unwind quickly, while steel duties and copper demand sit on the cost base for longer.
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Last updated 21 September 2026. Figures reflect the June quarter 2026 Producer Price Indexes released on 31 July 2026 and ACCC fuel price monitoring to 9 September 2026.
General information only. This article reports publicly available data and industry research for general information purposes. It does not take into account the circumstances of any particular business or project, and it is not financial, legal or contractual advice. Figures quoted are current as at the dates stated and are subject to revision by their publishers.
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