Australia is set to continue to experience above-average levels of construction cost growth, a new report suggests.

Quantity surveying firm Rawlinsons has published the July 2025 quarterly update of its Construction Market Insight Report.

The report provides a quarterly update in relation to developments which are impacting construction market conditions and costs throughout Australia.

It complements detailed cost information which is available through either the Rawlinsons Australian Construction Handbook or the Rawlinsons Cost Guide. These guides are available on the Rawlinsons web site.

According to the report, Australian capital city markets are expected to experience overall levels of construction cost escalation throughout 2025 that range from 4.0 percent in Canberra to 6.0 percent in Brisbane (see chart).

(image screenshot from Rawlinsons web site)

The report says that the nation’s construction market is still being driven predominately by public infrastructure investment.

It noted that the recent 2025/26 Federal Budget shows a consistent pipeline of committed projects across sectors such as utilities, healthcare, defence and social buildings.

However, private sector investment remains sluggish on account of high interest rates, higher construction costs and geopolitical uncertainty.

Going forward, Rawlinsons says that the industry is positioned for growth that will be fuelled by ongoing infrastructure work and a recovery in residential work.

Turning to costs, the report indicates that pressures are being driven by skilled labour shortages, contractor insolvencies and regulatory complexity regarding planning and approval processes.

On the positive side, however, Rawlinsons notes that material prices have stabilised whilst freight costs have fallen.

This has provided a degree of certainty in procurement for contractors.

“While escalation has lessened compared to the peak COVID period, it remains persistently above traditional historical averages adversely affecting numerous projects,” the report said.

“In 2025, the key factors driving cost escalation will include skilled labour shortages, uncertainty surrounding trade tariffs and fluctuations in energy prices.

“The rate of escalation can vary significantly from one project to another, driven by a range of factors including, but not limited to: labour availability, energy costs, financing rates, project timelines, material expenses, project size, builder margins, and supply chain procurement. Each project must be evaluated based on its specific circumstances.”

(source: Rawlinsons July 2025 Quarterly Update)

According to the report, cost escalation across 2025 will be most significant in Brisbane, Perth and Adelaide.

In Brisbane, Rawlinsons anticipates that a significant number of projects which have been delayed and put on hold will form the basis of strong activity levels in 2026.

Over coming years, resourcing and pricing pressures are anticipated as these projects combine with new infrastructure projects, work on Brisbane 2032 Olympic venues, the Hospital Capital Expansion Program and a strengthening housing market.

For the time being, however, Rawlinsons says that activity remains at sustainable (but busy) levels. Competitive pricing is still being achieved for projects which are able to be delivered before the anticipated peak in demand for skilled resources kicks in.

Another busy market is Perth, which has seen the fastest recovery in new housing construction of any major capital and which is still seeing an active level of public sector investment.

In the Western Australian capital, Rawlinsons says that projects continue to face upward pricing pressure on account of rising costs for subcontractor trades in areas such as structural (particularly formwork and concrete) as well as ceilings and partitions.

Activity levels are steady and most builders have a reasonable volume of work on the horizon.

Going forward, Rawlinsons also expects investment from private developers to increase.

For the time being, private developers largely continue to ‘wait in the wings’ until cost pressures ease and project feasibilities look more appealing.

At some point, however, ‘there will need to be an acceptance that construction costs are only going one way’. When this happens, private development is likely to increase again.

Turning to Australia’s largest city in Sydney, Rawlinsons expects reasonable levels of cost escalation (4.5 percent) over 2025.

Primarily speaking, cost increases are being driven by skilled labour shortages. These continue to drive wage inflation of 4-5 percent annually in enterprise agreements.

Shortages are particularly acute in the engineering and infrastructure related trades.

These challenges are compounded by ongoing difficulty in raising productivity.

Material cost pressures have generally moderated overall compared with the volatility that was evident between 2021 and 2023. However, upward pressures remain for costs on energy intensive materials such as concrete, bricks and glass.

Largely speaking, the market overall remains stable but cautious.

Much of the focus of work centres around public investment in areas such as healthcare and transport.

For now, sentiment among private sector developers and investors remains tentative (although recent interest rate reductions will help).

Developers are awaiting clearer signals regarding cost and demand before committing to new projects. Investors, likewise, are monitoring interest rates and construction trends.

Any sustained increase in private sector activity will depend upon interest rate cuts and cost stabilisation as well as improved buyer confidence.

The July 2025 quarterly update report can be seen here.

(image from Rawlinsons web site)

Australia’s most detailed cost guides to guide your next project

For detailed data to guide project planning, readers can purchase either the Rawlinsons Australian Construction Handbook or the Rawlinsons Cost Guide.

Launched in 1983, The Rawlinsons Australian Construction Handbook is now in its 43^rd edition and provides Australia’s most extensive library of construction cost data.

With more than 13,000 lines of data covering 32 trades, the Handbook is an essential tool for cost planning and provides accurate cost estimates for all project stages.

For smaller projects (up to $1.5 million), Rawlinsons Cost Guide serves as an essential reference book for builders, architects and consultants.

Both the Handbook and the Guide are available in traditional print or web-based digital format.

Free delivery is offered anywhere within Australia.

Purchasers receive quarterly price indices and updates throughout the year.

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