INTRODUCTION
Adjusting to evolving economic conditions
Our latest report shows how construction markets across Australia and New Zealand are adjusting to evolving economic conditions. Interest rate expectations, labour market tightness, and shifting infrastructure priorities continue to influence confidence heading into 2026. While Australia is experiencing steady activity in emerging growth areas, New Zealand is beginning to stabilise after a prolonged period of volatility.
Private investment strengthens Australia’s construction outlook
Australia’s economy grew by 0.4% in the September quarter and 2.1% over the year, supported by strong domestic demand and the fastest rise in private investment since 2021. Growth slowed slightly from early 2025 due to inventory drawdowns and weaker net trade, although household spending and business investment remained resilient.
Construction activity held steady through Q4, underpinned by public investment in health, education and utilities. Structural shifts are becoming more pronounced, with energy infrastructure and data centres emerging as key growth areas, while major road and rail programmes soften as large projects reach completion. Residential activity shows early signs of recovery, supported by planning reforms, a rise in dwelling approvals and targeted incentives. Despite stable momentum, labour shortages and delivery capacity constraints continue to challenge the market heading into 2026.
Policy support lifts confidence across New Zealand’s economy
New Zealand’s economy contracted by 0.9% in the June quarter, marking the third decline in five quarters. Activity remains subdued across construction, manufacturing and services, however recent interest rate cuts and easing inflation are helping to stabilise conditions.
The Reserve Bank lowered the Official Cash Rate to 3.0% in August, with further cuts expected to support demand. While construction consents remain flat, infrastructure investment is projected to strengthen ahead of the 2026 election. Labour shortages persist, with targeted migration and apprenticeship programmes aimed at helping to rebuild capacity. Although near-term growth is limited, policy adjustments and public sector investment are expected to support a gradual recovery.
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