Australia's building and construction industry is concerned that the federal government's banking reform could pose a threat to business sector lending.

The Australian Government has launched a banking reform called "Competitive and Sustainable Banking" which outlined some new initiatives aimed at improving the competitiveness of the current banking system.

Master Builders Association of Victoria Executive Director Brian Welch said the reforms were a step in the right direction for consumers but could have a detrimental effect on commercial customers, including builders.

"These reforms - including banning exit fees from 1 July, 2011 - will help Victorian's manage their ability to buy and keep the Great Australian Dream.

"Measures like enhancing the combined competitiveness of credit unions and building societies will help create a friendlier banking environment for struggling Victorians trying to buy or rent a home," he said.

However, Mr Welch thinks the package is far from perfect and could lead to the banks increasing costs in other areas, most likely in the commercial and business banking sectors.

"Since the beginning of the Global Financial Crisis, many of the smaller, 'mum-and-dad' builders have told us they are struggling to make a go of it, and addressing this needs to be the next priority," he said.

According to Mr Welch, a recent Master Builders survey revealed that nearly 45 per cent of residential builders' clients have cancelled or postponed projects this year because they could not secure finance.

"We fear that the government's lack of consultation in dictating these reforms will only lead to heart-ache in other areas, impacting on builders' businesses that are trying to remain profitable," he said.