Australia’s construction sector is facing severe structural headwinds, with material costs hitting historic highs and credit conditions deteriorating rapidly as the ongoing conflict in the Middle East fractures global supply chains, according to the Royal Institution of Chartered Surveyors’ (RICS) Q1 2026 Global Construction Monitor.
The report reveals a stark divergence between headline resilience and underlying operational distress. While the national Construction Sentiment Index managed a modest reading of +11, it marks a significant slide from the +21 recorded in the previous quarter.
The industry’s most acute pain point is the cost of materials, which surged to an unprecedented index reading of +86, the highest figure recorded since RICS began capturing data in Australia. This spike has been compounded by worsening supply constraints, with material shortages jumping from +27 to +49 over the quarter.
The financial climate offers little relief, as credit indicators across the past, next three, and next 12 months have all plunged into negative territory at -25, -31, and -39 respectively. This dual pressure of expensive materials and tight lending has forced current workloads backwards.
The private non-residential sector bore the brunt of the downturn, swinging into negative territory at -6, while private residential workloads flattened out from +16 to just +3.
Even the historically robust infrastructure sector felt the pinch, with public works stepping down from +24 to +14.
Heavy drops were recorded across energy (+49 to +26) and water infrastructure (+28 to +14), though 12-month infrastructure expectations remained a minor bright spot, creeping up to +44.
“The Australian construction sector is showing initial resilience in the face of a substantial and ongoing shock; though uncertainty remains elevated,” said Vishant Narayan FRICS, RICS Australasian Board Member.
“It is noteworthy that the Australian and global construction sectors are showing immediate signs of stress particularly in relation to material costs and tightening credit conditions with private non-residential construction (which is more prone to market cycles) already moving into negative territory domestically.”
The RICS Global Construction Monitor is a leading sentiment indicator trusted by policy makers and capital markets globally. Scores are calculated on a net balance basis , with net balance data that can range from -100 to +100.
