Australia is more than 112,000 homes behind its target of 1.2 million by mid-2029, new building data shows.

The nation's builders have completed 307,635 homes since the commencement of the national housing accord in the third quarter of 2024, the Australian Bureau of Statistics reported on Wednesday.

While the number of homes under construction has been trending steadily higher, the industry remains far below the required rate to meet the target.

Assuming a steady pace of dwelling completions, Australia should have already built 420,000 homes by now.

To catch up by the end date of June 30, 2029, Australia needs to build more than 274,000 homes each year, or about 69,000 each quarter.

A 0.4 per cent fall in dwellings completed in the March quarter to 43,816 won't help.

The quarter was impacted by the Middle East conflict and a return to rising interest rates, Master Builders Australia chief economist Shane Garrett said.

"Home building activity has been hurt by escalations in building costs and continued shortages of skilled tradies," he said.

"The ABS figures show building activity remains below the level needed and, at the same time, builders are telling us that uncertainty created by the federal budget is affecting confidence and slowing investment decisions."

The number of dwellings commenced in the March quarter fell 11.2 per cent to 48,012.

But commencements were still trending higher, with total dwelling starts 11.7 per cent higher than 12 months prior.

The quarterly fall was largely as a result of apartment commencements, which jumped 26 per cent in December, reverting to the mean.

In total, 243,864 homes were under construction in March - the most since records began in 1984.

Despite significant economic headwinds, Australia was making good progress with home starts continuing to climb year on year, a spokesperson for Housing Minister Clare O'Neil said.

"There's still so much more to do, but we've got an ambitious $47 billion plan to level the playing field for first home buyers and build more homes, and we'll keep delivering on it," the spokesperson said.

But opposition housing spokesman Andrew Bragg said the building activity data showed the government's housing targets were as dead as a doornail.

"These terrible figures highlight again that Australia cannot afford Labor's high inflation, low productivity economy or their $77 billion in new taxes," he said. 

"More taxes and more inflation means fewer homes."