Australia’s construction sector will employ almost 1.5 million people by the end of the decade, new forecasts suggest.

(image via freepix)

But the number of projects entering the forward pipeline is slowing.

And the nation will miss its five-year housing target by 275,000 homes.

The Australian Construction Industry Forum (ACIF) has released the November edition of its Australian Construction Market Report.

Published twice a year, the report provides an overview of current market conditions and the forward outlook across the nation’s building and construction industry.

It also provides detailed activity forecasts in relation to 20 subsectors for each state and territory over the remainder of the decade.

According to the report, the dollar value of construction work done throughout Australia is expected to increase by 1.6 percent during the current financial year.

This will take the sector’s output from $339.3 billion in 2024/25 to $344.7 billion in 2025/26 (all amounts in 2022/23 constant dollar terms).

Beyond this, ACIF expects modest but steady growth that will see activity reach $380.4 billion by 2029/2030.

The 1.6 percent expansion which is forecast in 2025/26 is lower compared with recent growth rates of 2.7 percent in 2024/25 and 4.2 percent in 2023/24.

However, activity levels remain elevated compared with historic standards aside from the mining boom period (see chart).

Turning to employment, ACIF forecasts that the number of people who are employed throughout the sector will increase by around 168,000 over the forecast period.

This will take the industry’s headcount from 1.32 million in 2024/25 to reach almost 1.5 million by 2029/30 (see chart below).

Fig 2.1. Construction work done actual and forecast

(image source: Australian Construction Market Report, November 2025, Australian Construction Industry Forum)

Project flow stalls

However, cracks are appearing as the flow of new projects has stalled.

Over the six months to April, a total of 704 projects were added to a Major Projects Database which is maintained by real-estate data services provider Cotality.

These were valued at $103.1 billion (constant 2022/23 dollars).

In the last six months, however, only 535 new projects were entered with a combined value of $48.7 billion.

Worst affected is the engineering sector, where the value of new electricity and pipeline projects dropped by 75 percent over the year to October.

Meanwhile, new project flow in non-residential building has fallen to its lowest level in nine years.

Nerida Conisbee, Chair of ACIF’s Construction Forecast Council, said that the decline in new projects is one of the report’s ‘most striking findings’.

She says that this points to a moderation in construction demand throughout 2026.

This will have a silver lining in terms of further easing pressures on resources, wages and costs.

“The work is not disappearing but there is much less of it entering the development pipeline,” Conisbee said.

Areas of opportunity

Across the industry, the report indicates that there are several areas of opportunity.

First, there is residential building.

In this sector, building approvals have trended higher over the past eighteen months since bottoming out in early 2024 as the interest rate cycle peaked.

Initially, the recovery was focused on detached housing. However, multi-residential approvals have now trended higher over the past year.

Going forward, ACIF forecasts respectable levels of activity growth across the forecast period.

This will be initially driven by tight housing supply but will be further supported by government planning reforms and social housing investment toward the latter part of the decade.

Meanwhile, activity in civil and engineering construction is expected to continue to grow and remain at elevated levels.

Not surprisingly, the biggest area is energy, where a massive project pipeline remains in respect of solar/wind generation, battery storage and transmission assets.

Another area is water, where governments are investing to cater for growing populations and higher rainfall variability.

This is being directed toward desalination, wastewater treatment and water network upgrades.

Whilst overall activity levels remain elevated, the report forecasts that the rate of growth in civil/engineering construction will taper off.

To be sure, this has always been expected as the boom in public transport work passes its peak.

Concerningly, however, ACIF notes the aforementioned declines in new project flow as well as a growing number of project cancellations.

This reflects ongoing concerns about workforce/capacity constraints as well as long delays in planning approval.

Turning to commercial non/residential building, activity growth is expected to remain modest overall notwithstanding a slight recovery in 2026/27 as encouraging prospects in some sectors are offset by the sluggish office and retail environment.

However, opportunities remain in terms of a backlog of existing major hospital builds, a growing number of data center and defence projects and encouraging approval data for hotel/accommodation facilities.

(image via Freepix)

Australia’s 1.5 million construction workforce

As noted above, ACIF expects that the number of people who are employed throughout the sector will increase by around 168,000 over the forecast period to reach almost 1.5 million by 2029/30.

Kerry Barwise, ACIF Chief Forecaster, said that employment growth is broadly expected to follow activity patterns.

This means that most of new job creation will be centered around residential building and will be taken up by skilled trades.

Indeed, tradespeople are expected to account for just over half (52 percent) of overall job growth over the period.

There will also be some new job creation in the low-skilled category.

Turning to the ‘high skilled’ category, Barwise does expect some employment growth to come from energy transition, water projects, large scale data centres and major defence works.

However, he cautions that these activities are very capital (and equipment) intensive.

For this reason, the expected growth in activity throughout this sector may deliver only a modest increase in employment opportunities for those who possess the technical skills to serve these particular hotspots.

He notes that engineers who sit on ACIF’s Construction Forecasting Council are warning that they are seeing very little growth in demand for their services at the moment.

In light of current labour shortages, meanwhile, the report notes that the anticipated growth in employment may place further strain on industry workforce capacity.

This is particularly the case as the industry has consistently struggled to achieve meaningful productivity improvements.

Asked what should be done, Barwise points to industry feedback about the need for a multi-faceted approach.

This would include:

• Policy reforms to streamline planning, reduce excessive regulation, minimise cost and boost workforce flexibility.
• Better public sector procurement practices such as embracing performance-based specifications, greater flexibility for contractors and designers to propose innovative solutions, embracing early contractor involvement and developing a consistent pipeline of work.
• Industry-led initiatives such as improving supply chain management, embracing technology and investing in training and innovation.

Fig. 5.3 Construction employment by skill

(image source: Australian Construction Market Report, November 2025, Australian Construction Industry Forum)

Missing national housing targets

The report also highlights challenges in meeting the national housing target of delivering 1.2 million new homes over the five years to 30 June 2029 as established under the National Housing Accord.

In its forecasts, ACIF says it expects national dwelling completions of 925,000 over the accord period.

This leaves a shortfall of 275,000 homes compared with the accord target.

In its report, ACIF noted that the 1.2 million number was designed to be a ‘stretch’ target that would be challenging to achieve.

Asked about the target, Barwise commends Commonwealth and state governments for their courage in establishing an ambitious objective.

But he cautioned against policies which merely fuel demand.

Instead, he stresses the need to boost new housing supply.

“Governments have been brave,” Barwise said.

“They put a number into the public domain against which their own performance can be measured. The looming shortfall gives us all the right message – we need to concentrate even more on raising supply.

“(However,) While they may be popular, policy measures that stimulate demand, at great cost to government, do almost nothing towards meeting measurable growth in supply.”