Australia’s economy is set to experience gradual growth, spurred by two further interest rate cuts, with expectations of 1.7 per cent growth in 2025 and 2.1 per cent in 2026, according to Oxford Economics Australia’s latest insights released ahead of their bi-annual economic outlook conferences.
The building and construction sector is poised for a record expansion, while shifts in the engineering construction market and export industries are shaping new economic opportunities.
Oxford Economics Australia projects that total building activity will reach a record $190.3 billion by the financial year 2030, with dwelling starts rising cumulatively by 30 per cent to 239,800 over the four years to FY2030.
Private investment is forecast to become the principal growth driver over the next decade, with electricity construction hitting record highs as the nation advances decarbonisation efforts.
“Private investment will gradually re-accelerate and, over the latter years of this decade towards FY2030, it will become the principal driver of growth in the economy,” said Adrian Hart, Director of Construction and Infrastructure Consulting at Oxford Economics Australia.
Despite global uncertainties, including tariff challenges and subdued business investment, the economy is expected to regain momentum.
“While Australia is largely out of the direct firing line from President Trump’s tariffs, we are not immune to the fallout,” said Harry Murphy Cruise, Head of Economic Research and Global Trade at Oxford Economics Australia.
He noted that global uncertainty unsettles businesses and weighs on the labour market.
Sean Langcake, Head of Macroeconomic Forecasting, added that business investment is “flailing,” which hampers productivity growth and economic progress.
“Turning this around is key to improving Australians’ living standards,” Langcake said, urging policymakers to prioritise skill matching and remove barriers facing construction and investment.
Climate and productivity challenges are also pivotal.
Kristian Kolding, Head of Consulting, said: “Australia’s long-term prosperity depends on setting climate targets that are both feasible and ambitious. In an era of short attention spans, we cannot afford to have short term thinking.”
Alex Hooper, Head of Climate & Energy Economics, emphasised that inaction on climate change would erode productivity significantly by 2060, while well-managed climate policy would result in greater economic resilience and productivity gains.
Construction sector trends supporting growth include lower interest rates, real wage growth, and targeted incentives for home buyers.
Senior Economist Maree Kilroy noted: “Units, especially at the more affordable end of the market, are poised for significant growth.”
She also highlighted that total dwelling starts are forecast to rise sharply.
Public building activity is expected to remain elevated through hospital projects and upcoming 2032 Olympic infrastructure, with a growing boom in data centre investment offsetting weaker office market demand.
The engineering construction market is shifting from traditional transport projects to utilities and mining.
Dr Nicholas Fearnley, Head of Global Construction Forecasting, stated: “Electricity construction activity is at a record level, as work continues on decarbonising the electricity network.”
However, challenges related to labour shortages will be heightened by geographic shifts in construction.
“It is difficult to get people to move to regional areas when they already have jobs,” Fearnley said, recommending stable, long-term projects to help workers settle regionally.
Oxford Economics Australia’s bi-annual economic outlook conferences are underway in Sydney and Melbourne, offering deeper dives into these sectoral trends and growth opportunities in construction, real estate, climate policy, and Australia’s economic trajectory.
