Australia’s construction sector is confronting a new surge in input cost inflation, as reported by Rider Levett Bucknall’s (RLB) Construction Market Update for the September quarter.
The report notes that renewed conflict in the Middle East has driven up the cost of diesel, freight, concrete, and other petroleum-linked materials. However, competitive tendering is preventing most of that hit from reaching clients.
Oliver Nichols, RLB Oceania director of research and development, said: These costs are being absorbed by contractors in most Australian cities, but Perth is bucking the trend with tender prices now forecast to rise more rapidly.
Perth leads tender price growth
RLB’s national Tender Price Index (TPI) forecast for 2026 remains at 4.6 percent. However, this figure masks significant variations between cities.
Perth’s forecast has been revised upward from 5.6 percent to 6.5 percent, now matching Townsville at the top with 7 percent.
This adjustment reflects Western Australia’s construction sector operating at or near full capacity across defense, healthcare, renewable energy, manufacturing, and residential projects.
Softer conditions have led to downgrades for Darwin, from 6.9 percent to 5.9 percent, and the Gold Coast, from 6 percent to 5.5 percent. Sydney and Melbourne continue to experience relatively subdued activity.
In Sydney, subcontractors actively seek future work, which helps mitigate the impact of higher fuel and material costs on tender prices.
Brisbane’s Olympic pipeline looms
There’s a six-month window for Brisbane projects under $80 million to tender now, as contractors offer competitive pricing ahead of the city’s Olympic-related construction boom.
Once demand increases, RLB anticipates resource and price pressures to rise. Brisbane’s TPI growth is forecast at 5 percent for 2026, increasing to 7 percent annually from 2027 to 2029.
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Here’s the breakdown for major cities:
- Adelaide: 3.5 percent (2025) to 5 percent (2029)
- Brisbane: 5 percent (2025) to 7 percent (2027-2029)
- Canberra: 3.75 percent (2025) to 4 percent (2029)
- Darwin: 5 percent (2025) to 4 percent (2029)
- Gold Coast: 4.5 percent (2025) to 7 percent (2027-2029)
- Melbourne: 4 percent (2025-2026) to 4.5 percent (2027-2029)
- Perth: 5.4 percent (2025) to 5.1 percent (2029)
- Sydney: 4.5 percent (2025) to 4.5 percent (2029)
- Townsville: 6 percent (2025) to 7 percent (2027-2029)
Labour shortages: the bigger threat
Fuel and freight volatility represent short-term challenges, but labour shortages pose a more significant, long-term issue.
Construction labour markets are tight, especially in Queensland, Western Australia, and South Australia, where online job ads for construction workers remain well above pre-pandemic levels.
Trade and apprenticeship starts have increased slightly, but migration is slowing, and few construction worker visas are being issued.
RLB predicts labour competition will intensify as data centre, residential, defense, and health projects progress, alongside preparations for the Brisbane 2032 Olympics.
Construction enterprise agreement wage growth is at its highest since the late 1990s, against a backdrop of record activity. Construction work done reached $328 billion in 2025-26, a 4.2 percent increase from the previous year.
Apartment and townhouse construction grew by 13.2 percent, while non-residential work increased by 9.3 percent, partly driven by data centres and health projects.
RLB forecasts TPI growth to average over 5 percent across major markets in the coming years, significantly higher than the 3.3 percent average between 2014 and 2019.
Nichols commented: Competitive tendering offers temporary relief from higher input costs, but it doesn’t signal a return to low-cost construction.