Australian construction and building costs have risen substantially since 2018, but the increase has not been uniform over time or across states. The biggest structural break occurred during 2021–2022, when material shortages, global freight disruption, strong housing demand and labour shortages produced an exceptional cost shock. Costs then moderated during 2023–2025, but they did not return to pre-2021 levels. In 2026, costs have begun accelerating again, particularly in Queensland, South Australia, Western Australia and Tasmania.
1. Overall Australian construction-cost trend since 2018
A useful national measure is the ABS Building Construction Output Price Index. Its index rose from about 112.9 in March 2018 to 163.3 in June 2026, equivalent to roughly a 45% increase over that period. The important point is that most of the increase occurred after 2020.
Australian building construction price trend, 2018–2026
ABS Building Construction Output Price Index. The index accelerated sharply during 2021–2022, moderated during 2023–2025, and accelerated again in 2026.
Source: Australian Bureau of Statistics Producer Price Indexes.
The major phases were:
| Period | Construction-cost trend | Main characteristics |
| 2018–2019 | Relatively moderate | Normal inflation, relatively stable materials and labour |
| 2020 | Initial disruption | COVID-19 disrupted manufacturing, logistics and construction activity |
| 2021 | Sharp acceleration | Housing demand, HomeBuilder, timber/steel shortages, freight problems and labour shortages |
| 2022 | Peak cost shock | Materials, freight, energy and labour costs surged |
| 2023 | Moderating but still high | Supply chains improved, material inflation slowed |
| 2024 | Much slower increase | Material prices stabilised, but labour, energy and contractor costs remained high |
| 2025 | Relatively moderate nationally | Input inflation slowed considerably, although regional/state differences remained large |
| 2026 | Acceleration again | Labour shortages, fuel/freight costs, copper/aluminium, concrete, plaster and renewed demand |
The ABS building-construction output index increased from 120.0 in June 2021 to 140.4 by December 2022, a very large increase in only 18 months. Annual house-construction price growth reached 20.5% in September 2022, the peak of the recent construction-cost shock.
2. What happened during 2021–2022?
This was the most important period in Australia’s recent construction-cost history. The combination of COVID-19 supply-chain disruption, international shipping delays, container shortages, very high freight costs, timber shortages, steel shortages, strong housing demand, government housing stimulus, HomeBuilder, skilled-trade shortages, rising wages, energy-price increases, higher fuel prices and strong infrastructure demand created a major construction-cost shock. For example, by September 2022, the ABS reported annual house-construction price increases of:
- Australia: 20.5%
- NSW: 17.4%
- Victoria: 20.1%
- Queensland: 24.2%
- South Australia: 23.7%
- WA: 21.7%
- Tasmania: 19.1%
The quarterly increase was particularly extreme in Queensland and Tasmania.
3. Construction costs did not fall after 2022
An important distinction is that the rate of increase slowed; construction costs generally did not fall back to 2018–2020 levels.
For example, input prices to house construction increased very rapidly in 2021–22. The ABS input index reached an annual increase of:
- 12.0% in December 2021
- 15.4% in March 2022
- 17.3% in June 2022
- 16.0% in September 2022
- 14.2% in December 2022
By 2024, annual input inflation had fallen to around 1–2%.
But this means:
The construction industry moved from very high inflation to a permanently higher cost base, rather than returning to its pre-pandemic cost structure. That is why builders can still be charging considerably more in 2026 even though some material prices have stabilised.
4. The situation in 2026
The latest ABS data show another acceleration.
In the June quarter 2026:
- Australian house-construction prices rose 2.0% quarterly
- House-construction prices rose 5.9% annually
- Building-construction prices rose 1.4% quarterly
- Building-construction prices rose 4.9% annually
- Input prices to house construction rose 2.1% quarterly
- Input prices rose 3.8% annually.
The June 2026 quarterly house-construction increase of 2.0% was the largest since September 2022. This is significant because it indicates that Australia’s construction-cost problem is not simply a COVID-era phenomenon.
Bottom line
Australia’s construction costs have risen dramatically since 2018, with the largest structural increase occurring during 2021–2022. The national building-construction index is roughly 45% higher than its March 2018 level. The market then entered a period of slower inflation rather than a return to earlier prices.
The current 2026 situation is particularly serious in Tasmania, WA, SA and Queensland, while Victoria is currently experiencing comparatively lower construction-cost inflation. Regional and remote locations generally face additional freight, labour and mobilisation premiums.
If you are assessing this from an Australian property-development/investment perspective, the next useful step would be to compare construction cost per m² by state and major regional city (Sydney, Melbourne, Brisbane, Perth, Adelaide, Hobart, Canberra, Darwin, Gold Coast, Sunshine Coast, Newcastle, Wollongong, Geelong, Cairns, Townsville, etc.), together with land prices and property prices. That would show where construction is currently economically most attractive.