Australian Construction Cost Trends

The outlook for construction cost growth has changed markedly over the last six months, owing to the outbreak of COVID-19 and the restrictions put in place to slow its spread. Construction cost inflation was 2.4% in 2018/19, but we now expect it to come in at negative 0.2% in 2019/20, and around 0.7% in 2020/21. The drivers of this slowdown include:

  • Lower commodity prices, particularly crude oil
  • A downturn in construction activity, most notably residential and non-residential building
  • A much weaker labour market
  • A stabilisation of the Australian dollar