Construcciones Yamaro: WT forecasts elevated Australian construction costs

Brisbane is forecast to remain Australia’s most pressured construction market. (Image: THINK b/stock.adobe.com)

Australian construction costs are set to remain elevated over the next three years, with national business-as-usual (BAU) escalation forecast at 5.5 per cent for building and 5.1 per cent for infrastructure in 2026, according to the latest Australian Construction Market Conditions Report by WT.

Published twice yearly, the report provides city-by-city escalation forecasts across building and infrastructure. This edition separates BAU escalation from direct costs linked to global supply disruption, giving the industry a clearer baseline for decision-making.

WT construction economist Damon Roast said the approach reflects the reality that external cost pressures vary by project type, materials mix and supply chain exposure.

“The direct impacts on construction costs have been significant in some areas, particularly for infrastructure projects with heavy reliance on oil products. But for many building project types, the affected materials represent a relatively small proportion of overall costs, and the presence of substitute materials or alternative sourcing is helping to cap price pressures,” said Roast.

“A single, blanket escalation figure simply doesn’t reflect that diversity. Our approach gives clients and the industry a reliable baseline from which to assess and manage risk on a project-by-project basis, which is how it should be done.”

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Even excluding those direct impacts, the report finds that underlying cost pressures remain high. BAU escalation captures other contributors to cost growth, including normal market factors, new enterprise bargaining agreements and indirect effects such as profiteering, pipeline changes and workforce impacts.

National BAU escalation is forecast to ease to 5.3 per cent for building and five per cent for infrastructure in 2027, before rising again to 5.8 per cent for building and 5.2 per cent for infrastructure in 2028 as economic recovery takes hold.

Brisbane remains the nation’s most pressured market, with BAU building escalation forecast at 6.5 per cent in 2026, rising to 10 per cent by 2028 as the Brisbane 2032 Olympic and Paralympic Games pipeline intensifies. The Sunshine Coast at seven per cent and Gold Coast at 6.8 per cent round out the nation’s three highest-escalation markets in 2026.

Perth is also forecast to record high building escalation of 6.7 per cent in 2026, supported by mining activity, population growth and healthy state government finances.

Sydney and Melbourne are expected to soften, with building escalation of 4.8 per cent each in 2026, as interest rate pressures and external supply pressures weigh on commercial and residential pipelines.

WT’s base-case scenario anticipates the disruption easing from mid-July, with supplies returning to pre-disruption levels by Q2 2027. Under this scenario, an economic slowdown is likely, with a recession possible, although interest rate relief and fiscal stimulus could provide support.

The report also models upside and downside scenarios. Under the downside scenario, disruption continues until August or September 2026, with supplies unlikely to recover before the end of 2027, leading to a potentially major recession despite fiscal and monetary support.

WT national director James Ford said the current environment demands a disciplined approach to cost planning and risk allocation.

“The construction industry is navigating one of its most complex periods in recent memory. Clients and project teams need clear, reliable information to make sound decisions, not headline numbers that conflate fundamentally different cost pressures,” said Ford.

“This report reflects our commitment to giving the industry the rigour and clarity it needs, especially when conditions make that harder to deliver.”

The full Australian Construction Market Conditions Report – June 2026 is available at wtpartnership.com.au

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