INTRODUCTION

Evolving conditions across 2026

Our latest report highlights how construction markets across Australia and New Zealand are navigating a more complex and uneven recovery in 2026. Slower economic momentum, persistent cost pressures, and geopolitical uncertainty are weighing on confidence and investment.

In Australia, activity continues to be supported by public investment and strong demand in sectors such as data centres and energy infrastructure, although growth is becoming increasingly concentrated. In contrast, New Zealand is gradually emerging from a prolonged downturn, with early signs of stabilisation but continued weakness in private sector demand and project conversion.

Investment and sector shifts sustain Australia’s construction activity

Australia’s economy is entering a phase of slower, investment-led growth. GDP rose by 0.3% in the March quarter, indicating that momentum has moderated from late 2025. Economic activity is becoming more concentrated, with strength in sectors such as data centres, infrastructure and defence, while household demand softens under higher interest rates and ongoing cost-of-living pressures.

Construction activity has remained steady through the first half of 2026, supported by public sector investment and a strong pipeline of major projects. Non-residential building continues to be underpinned by data centre development, while engineering activity is driven by transport, water and energy infrastructure. However, growth remains uneven across states, with Queensland and Western Australia gaining momentum, while Victoria remains relatively subdued.

Structural shifts are reshaping the market. Investment is increasingly directed towards energy transition infrastructure, utilities and digital assets, while traditional transport pipelines stabilise following the delivery of major projects. At the same time, delivery constraints, including labour shortages, cost escalation and infrastructure limitations, continue to challenge project feasibility and timelines.

Stabilisation emerging in New Zealand’s construction market

New Zealand’s economy is facing a more challenging recovery path, with growth remaining fragile and exposed to global uncertainty. While early indicators pointed to improving activity at the start of 2026, rising inflationary pressures linked to global conflict and the potential for tighter monetary conditions are weighing on confidence and demand.

Construction activity remains subdued, particularly across the building sector, where both residential and non-residential output declined in early 2026. Private sector investment is constrained by financing conditions and weak business confidence, limiting near-term project commencements.

Despite these challenges, early signs of stabilisation are emerging. Residential consents are increasing, and sectors such as data centres and social infrastructure are generating pockets of activity. The infrastructure sector continues to benefit from a substantial long-term pipeline, particularly in transport, water and energy, although many projects remain unconfirmed or in planning stages.

Looking ahead, recovery is expected to be gradual. Policy support, infrastructure investment and improving underlying indicators should help stabilise the market; however, progress will depend on the conversion of pipeline into committed projects and the resolution of ongoing global and domestic uncertainties.