Australia’s construction sector is absorbing higher input costs instead of passing them along to clients through tender prices, but this approach is becoming unworkable in certain areas. Escalating tensions in the Middle East have driven up diesel, freight, and concrete costs, yet aggressive tendering has largely shielded customers—except in Perth, where tender price increases are outpacing those in other regions.
Diesel now costs nearly $2.50 per litre, and concrete suppliers have reinstated surcharges of $7 to $9 per cubic metre after eliminating them in June. Despite these pressures, national tender price growth for 2026 holds steady at 4.6%, though regional disparities are sharp. Perth’s projection has risen from 5.6% to 6.5%, now aligning with Townsville’s 7%, the highest among Australia’s major markets.
Perth’s adjustment stems from its construction industry operating at near-full capacity, fueled by high demand in defence, healthcare, renewables, manufacturing, and residential development. In contrast, Darwin and the Gold Coast show softer conditions, with tender price forecasts dropping to 5.9% and 5.5%, respectively. Sydney and Melbourne maintain relative stability, as subcontractors compete aggressively to absorb cost increases.
Brisbane’s construction sector faces a tight timeline for projects valued under $80 million that are ready for tender now, as contractors recalibrate pricing ahead of the city’s Olympic-related projects. Once demand peaks, RLB anticipates further price and resource pressures. The city’s tender price growth is forecast at 5% for 2026, with an annual increase of 7% expected from 2027 to 2029.
While fuel cost spikes are temporary, labour shortages pose a more enduring threat. Construction job listings remain significantly above pre-pandemic levels, particularly in Queensland, Western Australia, and South Australia, where apprenticeship enrollments have failed to keep pace. Migration slowdowns and visa restrictions for construction workers are deepening the workforce gap.
Competition for skilled labour will sharpen as demand surges from data centres, residential developments, defence contracts, and health initiatives, alongside preparations for the Brisbane 2032 Olympics. Wage growth in construction enterprise agreements has reached its highest level since the late 1990s, and total construction work reached $328 billion in 2025–26, a 4.2% increase from the previous year. Apartment and townhouse construction rose by 13.2%, while non-residential projects grew by 9.3%, primarily driven by data centre and health sector expansion.
RLB emphasizes that competitive tendering only provides short-term relief and does not indicate a return to low-cost construction. The core challenges, labour shortages, high demand, and sustained input cost pressures, persist. Tender price growth is expected to remain above 5% across major markets for years, far exceeding the 3.3% average observed between 2014 and 2019.