The construction industry fears it could collapse if state governments don't crack the whip to enforce regulations, as insurers walk away from high-risk projects.
Master Builders Australia chief Denita Wawn is urging states to ensure greater enforcement of regulations so that cowboys are held to account.
"As an industry association we can't do that but those who regulate the industry can," Ms Wawn said.
Some states are excluding cladding from insurance policies in the wake of skyrocketing premiums.
"The insurers are taking on massive risk and are questioning whether or not they do that," Ms Wawn said.
John Massey - the certifier of Perth's Optus Stadium - has penned a letter to Scott Morrison warning his firm is in danger.
Mr Massey says his firm's contracts will be in trouble due to insurance companies offering private building certifiers coverage with exclusions for dangerous materials such as cladding.
"We will be required to close our business without our current insurance cover," he told the prime minister.
"Building surveying firms across Australia have closed their doors and many more will be forced to follow.
"Without a workable solution on the table very soon, I believe the building and construction industry throughout Australia will eventually collapse."
Mr Massey's warning comes after Australia's five largest industry groups demanded urgent action on the nation's "patchy and inconsistent" building rules.
The groups argue the inconsistent approaches are fanning a crisis in the building supply chain.
Labor has accused the federal government of failing to show leadership, particularly on combustible cladding.
"The federal government has a role to play in national building standards," Opposition Leader Anthony Albanese told reporters in Perth on Tuesday.
"It should provide national leadership to make sure there is a co-ordinated response to this issue.
"We should fix what needs to be fixed now, but we should have standards and measures in place to ensure that it never happens again."
However, the federal industry minister blames the states and territories for the mess.
Karen Andrews will put pressure on her state and territory counterparts when she meets them in Sydney on Thursday.
Ms Andrews has praised Victoria for announcing it will pay $600 million for combustible cladding to be removed from privately owned building.
She and industry groups have argued other states should follow suit.
"NSW can no longer put this issue into the too hard basket," the peak body for the state's Strata sector said.
"Cladding now impacts tens of thousands of people in this state.
"We will be seeking urgent talks with the NSW government to urge them to provide a similar assistance package to that announced today in Victoria."
But if NSW or other jurisdictions decide to do so, the federal government won't be footing the bill.
"The commonwealth is not an ATM for the states," she told ABC radio.
"This problem is of the states' making and they need to step up and fix the problem and dig into their own pocket."
Australian Associated Press