Labor says it would extend its proposed ban on importing highly flammable cladding panels to prohibit the sale and use of locally produced materials.

Leader Bill Shorten says, if elected, Labor will also impose tough penalties for building code breaches, under a plan to avoid a Grenfell Tower-style disaster.

Mr Shorten last week said Labor would ban the importation of the polyethylene core aluminium composite panels, which have been blamed for the Grenfell fire that killed at least 80 people in London in June.

But assistant industry minister Craig Laundy said it was already illegal to use the material on high-rise buildings in Australia under the National Construction Code, although some locally produced cladding could be used legally in shop fronts and outdoor signage.

Labor has vowed to strengthen the code and introduce new penalties for breaches and set up a national licensing scheme to include installers, fire protection practitioners, certifiers and surveyors.

Mr Laundy met with his state and territory counterparts last week and agreed to establish further measures for proper labelling and product testing, although state ministers were disappointed an agreement could not be reached on imports.