Australian Construction, Plant and Equipment Market Conditions, Q1 2025
Construction Sector Conditions
Despite the Reserve Bank of Australia’s rate cut in February 2025, ongoing high interest rates and borrowing costs, along with broader economic uncertainty, continue to make conditions in the construction sector difficult. These factors have led to a slowdown in activity in the sector, although the value of work still to be completed remains high.
Continuing supply chain disruptions and skilled labour shortages have seen construction costs over 2024 continue to outpace CPI. This is particularly the case in New South Wales and Western Australia where construction cost increases were the highest in 2024, whilst Victoria, Northern Territory and the ACT saw more moderate price growth. A key factor impacting states such as South Australia and Western Australia is a shortage of Tier One contractors who can manage the largest construction projects.
Commercial and industrial construction price growth for the 2024 calendar year is summarised in the table below.
| Commercial and Industrial Construction Cost Growth, 2024[1] | |
| NSW | 6.6% |
| VIC | 3.8% |
| QLD | 4.4% |
| SA | 4.9% |
| WA | 5.4% |
| TAS | 4.3% |
| NT | 1.8% |
| ACT | 1.4% |
Despite the continued increase in costs, average profit margins for the Australian construction industry remain in the low single digit range.[2] This helps to explain why this part of the economy accounts for just under a quarter of all insolvencies.[3] With continuing input price pressures from commodities and skilled labour constraints, it is likely construction prices will remain higher than the CPI for at least the next year.
Based on an average of predicted cost growth from across the industry, cost increases for the 2025 calendar year range from a low of 3.0% for the ACT, up to a high of 7.0% for Queensland.[4]
Plant and Equipment
Unlike building construction costs, plant, equipment and machinery costs moderated significantly over 2024. However, more recently the weakening Australian dollar is seeing the local cost of many imported pieces of equipment increase more significantly.
The Australian Bureau of Statistics most recent Producer Price Index (Output of the Manufacturing Industries series)[5] provides useful insights into indicative cost growth over 2024 across several industry groupings.
| Industry Grouping | 2024 Equipment Price Growth |
| Aged Care | 3.3% |
| Education | 2.4% |
| Energy (Renewables) | 4.3% |
| Food & Beverage | 4.1% |
| Healthcare | 3.6% |
| Manufacturing | 3.1% |
| Mining | 4.9% |
| Offices | 3.5% |
| Power & Utilities | 3.3% |
| Transport & Logistics | 2.8% |
Total investment in plant and machinery over 2024 saw several fluctuations from quarter to quarter which broadly reflects the cautious approach to capital investments given the current uncertain economic conditions.
What Does the Future Hold?
The upcoming Australian Federal election, rising trade tensions and continuing skilled labour shortages point to an upcoming period of economic uncertainty for Australia. These factors are likely to see construction price growth continue to outpace CPI for at least the upcoming year, while the predicted fluctuations in the Australian dollar could see import prices change significantly in both directions.
[1] Australian Bureau of Statistics, Producer Price Indexes Australia, Output of the Construction Industry, January 2025
[2] Master Builders Australia, Building and Construction Industry Forecasts Australia, September 2023
[3] Australian Securities & Investments Commission, Australian Insolvency Statistics, 17 March 2025 Release
[4] Range of sources including: Rider Levett Bucknall “Construction Market Update: Forecasting Falling Escalation in 2025 Across the Key Centre of Australia”, Fourth Quarter 2024; Rawlinsons Cost Management “Australian Construction Handbook 2025”; Altus Group “Australian Construction Price Outlook Q4 2024”
[5] Australian Bureau of Statistics, Producer Price Indexes Australia, Output of the Manufacturing Industry, January 2025
