There is a mixed outlook for Australian construction markets, with public investment driving the bulk of activity across the country. Stabilisation in building material costs is helping to cool inflation but will not be enough to offset strong labour cost growth due to persistent skills shortages.

The pipeline of public sector projects is growing, marked by a strong upward trend in nationwide infrastructure construction activity. Investment into infrastructure projects in the renewable energy and utilities sectors is increasing and will be a key driver of this growth over the next decade. As a result, there is an increased demand for skilled resources, intensifying concerns about construction market's capacity to successfully handle this extensive workload over the outlook.

With several construction activities set to commence on various federal and state government initiatives, we anticipate an increase in activity from 2025 onwards. The federal government has committed to significant infrastructure spending in the coming years, particularly in areas such as transportation, renewable energy and utilities. Initiatives from both federal and state governments to address the housing affordability crisis are also expected to result in a substantial increase in residential construction in the second half of the decade.

The general trend suggests softening across markets, except for Brisbane. However, some degree of cost escalation is anticipated across all markets. Material prices have slowed although this is being offset by strong demand for labour and associated costs. Higher labour costs are expected to remain a key contributor to cost escalation in the outlook as activity grows and competition for skilled labour increases. We anticipate that Queensland will experience the biggest constraints due to the forecast demand far outstripping local supply and capacity.