Australia’s construction sector eased in the September quarter, with total work done falling 0.7% to $79.3 billion. But underneath the headline decline, residential building recorded its strongest quarterly increase in a decade, reshaping supply dynamics as new dwelling activity ramps up.
New ABS preliminary figures show building work rose 4.0% to $43.26 billion, while engineering work dropped 5.8% to $36.02 billion. Trend estimates point to underlying momentum, with total construction work up 0.7% over the quarter.
Seasonally adjusted results showed:
Year-on-year, building work is 6.5% higher, while engineering construction sits 1.2% lower than the same time last year.
Trend estimates highlight a 2.0% lift in total building work this quarter.
Westpac senior economist Pat Bustamante (pictured) said residential activity was the strongest performer.
“Residential construction rose almost 9%yr (+4.2%qtr, the steepest increase outside of the pandemic since March 2015),” Bustamante said in a Westpac analysis.
The surge was led by a 4.7% jump in new dwelling construction, while renovations lifted 1.2%.
Bustamante added that, excluding a temporary mining-related spike in earlier data, underlying activity remains robust.
“Outside of this, activity was solid, rising 3.6%qtr and 3.0% in annual terms – strongest quarterly growth rate since 2017 outside of the covid pandemic,” the Westpac economist said.
Engineering construction fell sharply, dropping 5.8% in the quarter following a 5.5% increase in Q2. But once the mining-related spike is removed, momentum looks far healthier.
“Looking through the unwind of the mining related spike, the dynamic was very different: EC grew 3.1% in Q3 following a fall of 3.4% in Q2,” Bustamante said.
Public infrastructure rebounded 3.9% after two quarters of declines, helped by major project commencements in South Australia. Private engineering work rose 2.3% once mining volatility was adjusted for.
Renewable energy continues to dominate the engineering pipeline, accounting for around 18% of total engineering work. Since 2020, quarterly renewable construction spend has climbed 250%, rising from around $2 billion to roughly $7.5 billion in Q3 2025.
Non-residential building activity lifted 3.7% after three quarterly declines.
Private sector work rose 6.6% to be 5.5% higher annually, offsetting a 2.5% fall in public non-residential activity. A spike in commercial commencements in Q2 is likely supporting the rebound.
According to Westpac, the construction figures do not point to a weaker September quarter GDP result.
“While the headline numbers suggest downside risks for the Q3 GDP outcome, this is not the case – if anything, today’s numbers alone point to stronger growth,” Bustamante said.
He explained that ABS construction figures are recorded when work is completed, while national accounts measure progress payments across the project’s life cycle.
Construction cost growth has re-accelerated, with:
Bustamante said rising costs are prompting builders to increase output.
“While costs have picked up rates over the past two quarters, this has resulted in a supply response with residential construction making the largest quarterly gain in more than a decade (March 2015) outside of COVID,” he said.
Construction work increased across the major eastern states and SA:
The ACT, Tasmania, Western Australia, and the Northern Territory all recorded quarterly declines.
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