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Construction cost inflation forecast to rise again in 2026/27
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Macromonitor's regular reporting on construction cost escalation shows that cost inflation has returned to normal rates since the post-pandemic surge, but is set to rise again, modestly, next financial year.
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Average construction costs, across all types of building and construction, experienced double digit percentage increases during the peak year of 2022. And while inflation has now returned to more normal rates, the big increases in costs have now been locked in as the new normal, with more typical rates of increase now resuming from the new, higher base.
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The chart below shows average rates of cost escalation across all types of work in Australia. Note the importance of using escalation rates specific to your project type and location (Macromonitor regularly provides these for many types of clients), But the overall trend is still useful to examine. The chart below also shows ranges, which reflect the typical, volatility in costs observed historically.
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The expected increase in construction cost inflation next financial year is due to a range of factors affecting individual cost inputs (wages, materials, equipment, service etc.), combined with some overall macro factors, including:
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- A substantial rise in building and construction activity nationally, driven by hospitals, renewable energy, data centres, a residential building upturn, and continued high levels of road and rail work,
- Expected increases in metals, oil and other commodity prices, and
- A stable or depreciating Australian dollar against major currencies.
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The risks in the outlook remain more on the upside than the downside, due mainly to the unpredictable effects of the global trade environment.
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Contact us at info@macromonitor.com.au, if you required tailored cost escalation data and forecasts for any specific project or construction program.
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Our most recent reports:
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Australian Construction Cost Trends
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This report examines the outlook for construction costs, in detail be sector and type of input.
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Australian Construction Projects Database
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This latest list of projects corresponds with our fully revised set of forecasts published in November 2023.
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Australian Regional Construction Outlook
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Our latest regional forecasts for residential building and construction have just been released.
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Australian Construction Materials Forecasts
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Our latest forecasts assess the implications for construction materials demand of the current outlook for building and construction.
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Australian Road and Bridge Works
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This report examines the strength and composition of the current upturn, and determines the likely timing of the peak, and subsequent decline.
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