Pressures on construction prices and costs throughout Australia eased during the September quarter, new data shows.

Released by the Australian Bureau of Statistics, the latest Producer Price Index report has provided a breakdown of quarterly movements in output prices across Australia’s building and civil construction sector.

The data has also provided a breakdown of quarterly movements in prices for key material inputs to the detached house construction sector.

In terms of building construction, the data suggests that the rate of output price escalation moderated from 1.3 percent in the June quarter to 0.9 percent in the September quarter.

This represents a relatively normal rate of output price inflation compared with historic standards.

Over the past twelve months, output prices in building construction have increased by 5.5 percent.

In terms of specific building sectors.

  • Output prices for house construction increased by 1.0 percent in the September quarter and have risen by 4.4 percent over the past year. Quarterly price growth has been mainly concentrated in Western Australia, where a recovery in new home building activity has taken hold. Across all states, an ongoing skills shortage is the main driver of price increases.
  • Output prices in other-residential construction (units/townhouses/apartments etc.) increased by 0.8 percent during the quarter and are up by 6.9 percent over the past twelve months. Primarily, increases are being driven by higher labour costs which result from an ongoing shortage of skilled tradespeople along with competition for labour driven by a strong pipeline of non-residential infrastructure work. Higher prices for concreate and electrical services (driven by increased raw material and labour costs) have been a further contributing factor.
  • Prices for commercial/non-residential building construction increased by 0.9 percent during the quarter and have risen by 6.6 percent over the past year. Quarterly price growth was concentrated mainly in New South Wales and Queensland and was driven by ongoing labour shortages and continued strong demand from government-led education, health and infrastructure projects. As with the case in multi-residential construction, higher prices for concrete and electrical services were a further contributing factor in output pricing pressures.

Turning to civil and heavy engineering construction, the quarterly rate of output price escalation contracted from 0.6 percent in the June quarter to 0.4 percent in the September quarter.

In road and bridge construction, quarterly price growth increased from 0.2 percent in the June quarter to 0.8 percent in the September quarter on account of higher prices for cement, sand, energy and freight.

However, the rate of output price inflation in other civil and heavy engineering construction eased from 0.6 percent in the June quarter to 0.4 percent in the September quarter.

The modest rate of price growth in this segment was driven by rising costs for labour and raw materials.

Over the past year, heavy and civil engineering prices have risen by 3.0 percent.

As mentioned above, the report also provides details on quarterly movements in the price of materials which are key inputs in detached house construction.

Overall, the report showed that material price pressures remain subdued.

All up, input prices increased by only 0.3 percent during the September quarter and by 1.4 percent over the past twelve months.

The main area of material price pressure in materials that contain copper.

Prices for these materials increased during the third quarter as higher copper prices from the first half of 2024 were passed through.

As a result, prices for electrical equipment increased by 4.4 percent as the high copper prices for manufacturing led to higher prices for electrical cables & conduits.

Other increases were seen in other metal products (0.9 percent) as higher prices for aluminium lead to higher costs for aluminium windows and doors along with ceramic products (+0.8 percent) as higher prices for energy, labour and freight have driven an increase in costs for clay bricks.

Partly offsetting this were price declines of 1.2 percent in plumbing products.

This was driven by lower costs for sheet metal sanitaryware (-5.2%) due to falling demand for later-stage construction materials and lower steel and nickel prices for manufacturing.

 

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