Construction cost pressures throughout Australia are continuing to ease, new data shows.

But pressure remains on account of high concrete prices and ongoing trade shortages.

Published by the Australian Bureau of Statistics, the latest Producer Price Index report shows that output prices in building construction increased by 1.0 percent in the June quarter.

This represents the lowest quarterly rate of price escalation since March 2021.

Meanwhile, output prices in civil and heavy engineering construction increased by 0.9 percent.

This was higher compared with the March quarter (0.3 percent) but represented the second lowest rate of escalation since the March quarter of 2021.

Across specific sectors:

• Output prices increased by 1.0 percent in detached house construction as rising prices in New South Wales and Victoria driven by shortages of labour in finishing trades were partly offset by falling prices in Western Australia.
• In multi-residential building construction, output price growth of 0.9 percent in the June quarter was driven by skilled trade shortages along with ongoing pricing pressure for concrete based structural components and internal fittings. These in turn are being driven by rising demand, higher manufacturing costs (on account of rising energy costs) and labour shortages. The increases are predominately affecting NSW and Queensland.
• In non-residential building construction, output price increases of 0.9 percent for the quarter were driven by aforementioned pressures on concrete based materials as well as pressure on skilled trade availability.
• In road and bridge construction, price escalation moderated from 0.9 percent in the March quarter to 0.4 percent in the June quarter. This represents the slowest level of price growth since the March quarter of 2021 and is well below the 2 percent plus quarterly growth rates that were evident across calendar 2022. The increases have been driven by rising costs for concrete and aggregate which in turn have been driven by energy price rises and their flow-through impact on manufacturing costs.
• In other heavy and civil construction, prices increased by 1.0 percent throughout the June quarter after having been virtually unchanged in the March quarter. This, however, still represents the second slowest rate of growth since the March quarter of 2021. The increase was driven by the higher concrete prices referred to above along with higher diesel prices which led to increased costs for transport and machine operation.

The latest data confirms that cost pressures across the sector have eased after a surge in output price growth which took hold from the beginning of calendar 2021 and lasted throughout calendar 2021 and 2022.

That escalation has seen output prices rise by 23 percent for building construction and by 17 percent for heavy and civil infrastructure construction since the beginning of calendar 2021.

In some sectors, pressures have been particularly severe.

Whilst output price growth in detached house construction has eased over the past nine months, prices in that sector remain 33 percent higher compared with the beginning of 2021 and increased by 22 percent in the twelve months to September last year.

In road and bridge construction, prices rose by 11 percent across calendar 2022.

In addition to output prices, the data also shows that input cost pressures have eased.

Indeed, price growth for materials which are used in detached house construction fell from 1.6 percent in the March quarter to 0.6 percent in the June quarter.

This represents the slowest quarterly rate of price growth since December 2020.

Material price growth for detached housing has now slowed for four consecutive quarters amid improvements in supply chains and weakening demand for new housing.

The more modest increase was driven by energy intensive materials such as plaster, concrete, and sanitaryware products as suppliers passed through the increased energy and freight costs from recent quarters.

This was offset by a continued fall in steel prices.

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