Member for Western Victoria Jaala Pulford believes a State Government decision to axe rural and regional home owners' incentives has hit Wimmera building approvals.
Ms Pulford, also the Shadow Parliamentary Secretary for Rural and Regional Development, said the Australian Bureau of Statistics' latest figures showed housing approvals dropped by 25.8 per cent in the March quarter this year before the schemes ended on June 30.
She said state monthly figures for July showed the number of building approvals dropped by 29.4 per cent.
Ms Pulford said the state's building industry believed the government's decision to cut the grants which included a $13,000 first-home bonus and a $6500 regional bonus caused the declines.
"It is clear as crystal that the Premier Mr Baillieu's choice to scrap the home owners' bonus has had an immediate impact on rural and regional communities,'' she said.
"The Baillieu government's decision to scrap the bonus couldn't have come at a worse time.
"The biggest challenge for the future of these communities is to hold onto their young people and generate sustainable local employment.''
Housing Industry Association state executive director Gil King said the July percentages came as little surprise to the industry.
"The fate of the Victorian housing industry for the second half of 2012 was sealed the moment the State Government made the decision to abruptly discontinue the first home buyer bonus and regional bonus,'' he said.
"The industry accepts the cyclical nature of home-building, however we could certainly do without the added volatility introduced by untimely policy decisions.''
Ms Pulford said the association's state outlook had forecast building approvals would continue to drop over the next two financial years.
She said the schemes had not only provided support for first home owners but also created thousands of jobs across rural and regional communities.
"Families in the Wimmera deserve more from Mr Baillieu,'' she said.
Member for Lowan Hugh Delahunty denied Ms Pulford's assertion the cuts had caused a significant drop in Wimmera building approvals.
"It's much broader than that simplistic view,'' he said.
"The cost of living and the carbon tax and also the world economy
everyone's lost confidence in Australia's financial system,'' he said.
Mr Delahunty said a higher cost of living had caused a building decrease in approvals across the nation.
"Don't think it's unique to the Wimmera,'' he said.
"There's much more to it than the simplistic view she's given.''