Leading international project advisory firm WT has released the latest edition of its Australian Construction Market Conditions Report, revealing that construction cost escalation remains elevated across most markets, despite signs of softening momentum in construction activity.
National cost escalation for building is forecast at 5.3% for 2025, with infrastructure following closely at 5.1%.
The report shows that cost pressures continue to challenge the industry – driven by entrenched labour shortages, volatile material costs, and subdued investment in sector capacity and capability.
Despite these pressures, construction activity remains near historic highs across many sectors, including health, education, utilities and renewables. However, the report warns that the compounding effects of global trade tensions and constrained government spending may dampen the sector’s desire to invest in its capacity, putting downward pressure on escalation in the near term.
“We’re seeing a complex mix of strong construction pipelines and persistent cost risks,” says Damon Roast, WT’s construction economist. “While some regions show early signs of moderation, broader investment in skills and materials capacity is still lagging. Without it, elevated escalation could persist longer than expected.”
