en.Wedoany.com Reported - WT has released the latest edition of its Australian Construction Market Conditions Report, indicating that construction costs in Australia will remain elevated over the next three years. In 2026, national Business as Usual (BAU) construction cost growth is forecast at 5.5%, while the infrastructure sector is expected to see 5.1% growth.
The report is published twice a year, forecasting construction and infrastructure cost growth by city. The methodology in this edition has been adjusted to address the Middle East conflict that erupted in February 2026, separating BAU growth from the direct impact of the conflict to provide the industry with a clearer and more useful benchmark for decision-making.
WT Construction Economist Damon Roast stated that this approach reflects the reality that the direct impact of the Middle East conflict varies significantly depending on project type, material mix, and supply chain exposure. Roast noted that bundling the direct impact of the Middle East conflict with normal business growth would distort the actual cost pressures facing the industry. In some areas, the direct impact of the conflict on construction costs is significant, particularly for infrastructure projects heavily reliant on petroleum products. However, for many building project types, the affected materials account for a relatively small proportion of total costs, and the availability of alternative materials or alternative procurement sources helps to curb price pressures. A single, blanket growth figure simply cannot capture this diversity. This methodology provides clients and the industry with a reliable benchmark to assess and manage risk on a project-by-project basis, which is the correct approach.
Even excluding the direct impact of the Middle East conflict, the report finds that underlying cost pressures remain elevated. BAU growth encompasses all other factors driving cost increases, including normal market factors, new Enterprise Bargaining Agreements, and indirect impacts of the conflict, such as speculative behavior, changes in project pipelines, and labor impacts. National BAU construction cost growth is expected to moderate to 5.3% in 2027, and infrastructure to 5.0%. Subsequently, as the economic recovery stabilizes, construction cost growth is projected to rise again to 5.8% in 2028, with infrastructure at 5.2%.
Brisbane remains the most pressured market nationally, with BAU construction cost growth forecast at 6.5% in 2026, rising to 10.0% by 2028 as the project pipeline for the 2032 Brisbane Olympic and Paralympic Games strengthens. The Sunshine Coast (7.0%) and Gold Coast (6.8%) rank as the second and third most pressured markets nationally in 2026. Perth is also expected to see construction cost growth of 6.7% in 2026, supported by continued strength in the mining sector, population growth, and the state government's sound financial position. Sydney and Melbourne are expected to see moderation, with construction cost growth of 4.8% each in 2026, as interest rate pressures and the Middle East situation weigh on commercial and residential project pipelines.
WT's base case scenario assumes a ceasefire agreement in the Middle East conflict by mid-July, with supply returning to pre-conflict levels by the second quarter of 2027. Under this scenario, an economic slowdown is possible, with a high likelihood of recession, although interest rate easing and fiscal stimulus may provide support. The report also models positive and negative scenarios. In the negative scenario, a resolution to the conflict is not reached until August or September 2026, with supply unlikely to recover before the end of 2027, potentially leading to a severe recession despite fiscal and monetary support.
WT National Director James Ford stated that the current environment demands a rigorous approach to cost planning and risk allocation. Ford noted that the construction industry is navigating one of the most complex periods in recent memory, and clients and project teams need clear, reliable information to make informed decisions, rather than headline figures that conflate fundamentally different cost pressures. This report reflects our commitment to providing the rigor and clarity the industry needs, especially when conditions make this more challenging.
This article is compiled by Wedoany. All AI citations must indicate the source as "Wedoany". If there is any infringement or other issues, please notify us promptly, and we will modify or delete it accordingly. Email: news@wedoany.com
