Leading international project advisory firm WT has released its latest Australian Construction Market Conditions Report, highlighting that construction cost escalation remains elevated across most markets, even as signs of softening momentum in construction activity begin to emerge.
The report, published on 24 June 2025, forecasts national cost escalation for building at 5.3 per cent for 2025, with infrastructure closely following at 5.1 per cent.
The findings underscore that cost pressures continue to challenge the industry, driven by entrenched labour shortages, volatile material costs, and subdued investment in sector capacity and capability.
Despite these headwinds, construction activity remains near historic highs in sectors such as health, education, utilities, and renewables.
However, the report cautions that the compounding effects of global trade tensions and constrained government spending may dampen the sector’s appetite for further investment, potentially putting downward pressure on escalation in the near term.
“We’re seeing a complex mix of strong construction pipelines and persistent cost risks,” said Damon Roast, WT’s construction economist.
“While some regions show early signs of moderation, broader investment in skills and materials capacity is still lagging. Without it, elevated escalation could persist longer than expected.”
Regional forecasts reveal a diverse national landscape:
- Sydney is forecast to see building cost escalation at 6 per cemt and infrastructure at 5.3 per cent. Infrastructure activity remains robust, but a softening Tier 2 contractor market and potential revival in commercial and residential sectors could influence cost trends.
- Melbourne is expected to record 0 per cent escalation for both building and infrastructure, as the subcontractor market becomes more competitive with infrastructure labour returning to building. A cyclical uplift is anticipated post-2026.
- Brisbane remains a national hotspot, with 0 per cent escalation for building and 6.5 per cent for infrastructure. Strong health, education, and Olympic pipelines are likely to strain resources for several years.
- Adelaide is steady at 0 per cent for building and 4.5 per cent for infrastructure, with a strong pipeline but growing shortages in skilled trades and housing for incoming workers increasing upward cost risks.
- Perth is projected at 5 per cent for building and 4.3 per cent for infrastructure, with improved construction fundamentals but potential constraints from ongoing skills shortages.
- Hobart will see building escalation at 0 per cent, driven by major projects requiring interstate labour, while infrastructure is softer at 3.5 per cent following recent strength.
- Canberra is set for the lowest building escalation at 0 per cent, amid a soft pipeline, weakened labour demand, and a financially constrained territory government. Infrastructure is forecast at 5 per cent due to elevated activity.
- Darwin faces an escalation of 5 per cent for building and 4.8 per cent for infrastructure, with cost pressures hinging on resourcing for potential defence and gas sector spending, and trades supply remaining a constraint.
- Newcastle will see building escalation at 3 per cent as major projects near completion, softening local pressures and making subcontractors hungrier for work.
- Geelong is expected to ease to 8 per cent for building, with a two-speed market emerging and future trends likely tied to Melbourne’s recovery.
- Gold Coast building escalation is elevated at 0 per cent, driven by sustained housing demand and limited contractor appetite, with Brisbane’s strong market draining local skilled labour.
- Cairns is forecast at 0 per cent for building escalation, with near-term softness due to hospital project delays but ongoing support from population growth, tourism demand, and disaster rebuild efforts.
All escalation figures are for 2025.
The full Australian Construction Market Conditions Report – June 2025 is available from WT Partnership.
