Major drivers of Australia’s construction-cost increase
I would group the causes into 12 major factors:
1. Global supply-chain disruption
COVID disrupted factories, ports, shipping and logistics.
2. Freight costs
International shipping and domestic transportation costs increased substantially.
3. Timber shortage
A major driver of the 2021–22 construction shock.
4. Steel and metal prices
Steel, aluminium and copper significantly increased construction costs.
5. Strong housing demand
Housing demand exceeded construction capacity.
6. Government housing stimulus
HomeBuilder and other stimulus increased construction activity while supply was constrained.
7. Skilled labour shortages
Trade shortages pushed up wages and subcontractor prices.
8. Energy costs
Energy-intensive products such as cement, bricks, glass and metals became more expensive.
9. Fuel costs
Higher fuel costs increase the cost of transporting almost every building material.
10. Infrastructure boom
Large government infrastructure projects compete for the same labour, materials and equipment used by private construction.
11. Extreme weather
Floods, cyclones, bushfires and storms increase both repair/rebuild demand and insurance costs.
12. Builder insolvencies
Financial stress and insolvencies cause surviving contractors to increase prices to compensate for greater commercial risk. ABS has highlighted insolvency and labour shortages as factors affecting construction prices.
Extreme weather is becoming an increasingly important cost driver
This deserves particular attention for Australia. Floods, cyclones, storms and bushfires create a double construction-cost effect:
First: buildings need to be repaired or rebuilt.
Second: the demand for builders, trades and materials increases dramatically in affected regions.
This competes with normal residential construction. The latest Insurance Council analysis says more than 400,000 claims associated with declared weather disasters occurred between 2022 and 2026, creating additional pressure on construction resources. Queensland is particularly exposed.