Australia’s construction sector continues to face persistent cost pressures in 2025, with national building cost escalation forecast at 5.3% and infrastructure costs close behind at 5.1%, according to project advisory firm WT.
“We’re seeing a complex mix of strong construction pipelines and persistent cost risks,” said WT construction economist Damon Roast (pictured). “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.”
WT’s report highlighted a combination of entrenched labour shortages, volatile materials pricing, and underinvestment in construction sector capacity as key contributors to the continued escalation.
This comes as Cotality’s Cordell Construction Monthly reported 1,127 new projects were added to the pipeline in May – up 8.6% from April – although project commencements remain weak. Only 81 projects moved into construction, down 56.1% on the 12-month average.
Cost escalation is forecast at 6% for building and 5.3% for infrastructure. While infrastructure demand remains high, a softening Tier-two contractor market and potential recovery in commercial and residential projects could influence the pace of escalation.
WT predicts flat escalation (0%) for both building and infrastructure. Subcontractors are becoming more competitive as labour returns to building from the infrastructure sector. A cyclical uplift is expected post-2026.
Brisbane remains a national hotspot, with building escalation at 0% and infrastructure escalation at 6.5%. Ongoing demand from health, education and Olympic-related projects is expected to strain resources for years to come.
Escalation remains steady at 0% for building and 4.5% for infrastructure. Despite a strong project pipeline, trade shortages and housing access for incoming workers are increasing upward cost pressures.
Forecasts show 5% escalation for building and 4.3% for infrastructure. Activity fundamentals have improved despite subdued mining investment. However, labour constraints could slow gains.
Building escalation is flat at 0%, while infrastructure sits at 3.5%. Major projects are attracting interstate labour, but a softening pipeline may limit further growth.
The ACT is expected to record the lowest building escalation (0%), due to weak labour demand and a constrained government budget. Infrastructure, however, is forecast at 5%, supported by a strong project pipeline.
Both building (5%) and infrastructure (4.8%) escalation are forecast to stay elevated. The outlook depends on resourcing for defence and gas sector projects, with trades supply remaining tight.
Despite signs of pipeline growth and regional moderation, WT warns that Australia’s construction industry faces a prolonged period of tight cost conditions unless sector-wide investment in capacity and capability is addressed.
