Pressures on construction prices and costs throughout Australia appear to be easing, with the latest data showing that output price growth in housing construction and civil/heavy industry construction has slowed.

But new pricing pressures are emerging for energy intensive materials such as concreate and cement.

The Australian Bureau of Statistics has released the December Quarter edition of its Producer Price Index report, which details input and output price and cost movements across various sectors of the economy.

Overall, the data shows that construction cost pressures eased during the December quarter.

In building construction, the pace of output price growth eased from 2.7 percent in the September quarter to 1.6 percent in the December quarter.

Whilst price growth at this level is still well above that seen prior to the pandemic (see chart) – it represents the lowest quarterly rate of price acceleration since the March quarter of 2021.

Largely speaking, the decline was caused by an easing in the rate of output price growth for detached housing from 4.2 percent in the September quarter to 1.1 percent in the December quarter.

Whilst this implies a level of cost escalation that is above historic averages, it represents the slowest rate of price growth since the December quarter of 2020.

However, quarterly price growth for multi-residential building and non-residential building remained at historically elevated levels of 1.9 percent each.

Speaking of the house construction sector, the ABS said that cost pressures remain in terms of a shortage of skilled trades in areas such as bricklaying, carpentry and roofing.

This was notwithstanding that price growth has eased on account of slower levels of material cost escalation (see below).

In terms of commercial and multi-residential, the agency said that price growth was being driven by strong price growth in Victoria and South Australia and is being underpinned by a combination of supply chain disruptions for imported products, high demand for finishing stage materials and trades and ongoing skilled labour shortages.

That said, there are signs of an easing of pressures in some parts of the country.

In Western Australia, for instance, output prices for commercial building actually contracted during the quarter on account of falling steel prices and reduced costs for beginning stage skilled trades such as masonry and structural construction.

Whilst the rate of output price growth may be easing, however, the impact of the past two years should not be underestimated.

Across the broader building sector, output prices rose by 11.4 percent in calendar 2022 and have increased by 20.1 percent over the past two years.

In detached housing specifically, output prices are up by 17.2 percent and 30.2 percent over the past twelve months and two years.

Turning to the civil sector, meanwhile, the report shows that the rate of price growth in heavy and civil engineering construction eased from 2.7 percent in the September quarter to 1.3 percent in the December quarter.

The decline was caused by an easing in road and bridge construction price growth and other heavy and civil construction price growth from 2.7 percent each in the September quarter to still elevated levels of 2.1 percent and 1.3 percent respectively in the December quarter.

Whilst this represents an easing in price growth, it still represents a historically elevated level of output price escalation.

Speaking of road and bridge construction, the ABS says increases are being driven by higher costs for concrete and bitumen which are being underpinned by high energy and manufacturing costs along with strong global demand and limited supply.

In other heavy and civil engineering, prices rose on account of higher diesel costs and strong labour demand.

Over the past twelve months and two years, heavy and civil construction output prices have risen by 9.6 percent and 15.7 percent respectively.

In addition to output prices, the ABS also provides a breakdown of input cost movements specifically in relation to detached housing.

According to the ABS, the rate of material price escalation in detached housing contracted from 2.9 percent in the September quarter to 2.2 percent in the December quarter.

At this level, the rate of increase is at its lowest level since the March quarter of 2021 but remains extremely high by historic standards.

Driving the increase are rising prices for later and finishing stage materials such as plywood, glass, plasterboard and carpet.

This is happening as suppliers pass through increases as sustained activity in residential construction places upward pressure on finishing stage material prices.

High fuel and energy costs have also contributed to the material price increases this quarter.

This has been partially offset by a 2.1 percent decline in the cost of steel products as prices for steel beams and sections, improved supply conditions and lower shipping costs.

Particular price movements over the quarter included:

  • Timber, board and joinery (+2.1%), driven by cupboards and built-in furniture (+5.6%), due to supply constraints for plywood, and increased glass prices.
  • Other materials (+3.1%), driven by plaster products (+3.3%), due to increasing global gypsum prices, and high manufacturing and freight costs.
  • Concrete, cement and sand (+5.0%), driven by ready mixed concrete (+4.8%), due to increased costs for sand, cement and aggregate, coupled with high demand from the construction sector.
  • Steel products (-2.1%), driven by steel beams and sections (-2.7%), due to reduced steel costs, improved supply conditions and lower shipping costs.
  • Electrical equipment (-0.3%), driven by electrical cable and conduit (-1.0%), due to decreases in global copper and PVC prices, and lower import costs.

All up, material prices for housing construction have risen by 14 percent across calendar 2022 and by 28 percent across 2021 and 2022.

The latest report comes as cost pressures within Australia’s construction sector have eased but remain significant.

Whilst pressures upon some material prices such as steel have moderated, substantial pressures remain for energy intensive products such as concrete amid the Ukraine war and rising energy costs.

Meanwhile, several areas within construction remain affected by a severe shortage of skilled workers.

This is being driven by a huge pipeline of infrastructure work in civil construction and a record number of dwellings under construction in residential building.

As a result, employment throughout the construction sector has reached record levels whilst job vacancies across many categories of construction management, architecture and engineering, construction trades and construction labouring roles are at or near record levels (refer link above).


Master Builders Australia CEO Denita Wawn welcomed the deceleration in costs overall but added that ongoing cost pressures remain.

“The apparent deceleration in the cost of building material costs is a welcome development,” Wawn said in a statement provided to Sourceable.

“However, the perception of builders is that material cost pressures remain a significant source of pressure to the operations. In addition to cost, there are also other issues with the supply of materials such as delays and lack of availability. While costs are easing in some areas, pressures have intensified in the markets for concrete, cement, sand, glass and ceramics.

“At present, the cost and availability of skilled trades is the biggest issue in the building and construction industry. Since about mid-2022, this has probably represented a bigger headache than the cost pressures in the building materials market. The lack of sufficient labour supply is making it more expensive to complete projects. It also takes longer to find suitable labour, and this results in projects taking longer to complete and complicates the sequencing of different parts of the work.

“There are some hopeful signs in the latest data: the cost of steel products and structural timber actually dropped during the December 2022 quarter. This is an important development because these were the areas where the some of the largest cost increases had previously occurred. We would be hopeful that the steel and timber prices will continue easing back a little during 2023.

“However, there are ominous signs that the cost pressures have intensified in several markets including glass, tiles, sand, ceramics, concrete and cement. These cost pressures are the result of big rises in the price of gas which is used intensively in the production of some building products. The worry for the industry is that these costs could accelerate further.”

Asked about policies which could help to ease cost pressures, Wawn acknowledged that there is little which can be done to immediately ease material costs as many commodity prices are generated on the international market.

However, she added that there actions which governments can take to help ease overall pressures.

“With respect to material costs, most commodities prices are generated on international markets so there is a limit to how much control we can exert upon them. The best assistance that governments can offer is to exercise patience, forbearance and understand in their dealings with the building and construction businesses which are affected by supply chain difficulties.

“However, governments can do more to minimise cost pressures associated with other supply-side difficulties such as bottlenecks in our migration system, unnecessary regulatory burdens on builders and a lack of land supply.”


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