Report | Creating Resilience

Australia Local Response - Sharp Rise In Construction Cost Inflation To Persist June 2022

June 28, 2022

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Costs in construction have spiked in recent months, driven by inflation, economic stimulus and supply chain challenges, impacting on material availability. The increase in construction costs is putting pressure on the development pipeline, margins and timelines

 

Price increases were recorded across all key material and staffing indicators. The sharpest increase between Q1 2021 and Q1 2022 was structural steel which increased by 39.5% per tonne followed by plasterboard which increased 35.3% per sqm.

 

The majority of recent construction contracts have priced in cost rises which will mitigate risks to developers. Although material costs are expected to moderate in 2023, renegotiated EBAs will drive the costs of unionised labour over the next 24 months. Subsequently it is the cost of labour that will be the key driver of construction cost increases from 2023 onwards.