Australia’s construction industry is under immense pressure. Cost escalation, labour shortages, and material volatility are converging to create a perfect storm — one that demands smarter building practices and accelerated technology adoption.
Why Now? Innovation Is Urgent, Not Optional:
Australia’s construction industry is under immense pressure. Cost escalation, labour shortages, and material volatility are converging to create a perfect storm — one that demands smarter building practices and accelerated technology adoption.
Here’s what’s driving the urgency:
- Cost Escalation: Rising material prices, global supply chain disruptions, and increased transportation costs are inflating project budgets and stretching timelines.
- Labour Shortages: Skilled labour is in short supply, driving up wages and intensifying competition for workers. This challenge is compounded by housing access issues and interstate migration pressures.
- Material Challenges: Locally intensive materials like concrete, plasterboard, and bricks continue to rise in cost, making it increasingly difficult for private sector projects to remain viable.
These compounding pressures are forcing firms to rethink how they build — and fast. By reimagining procurement, contracts, and delivery models, builders can improve productivity, remain competitive, and navigate the uncertainty ahead.
Housing productivity has fallen by more than 53% over the past three decades — it now takes twice the effort, resources, and cost to deliver the same level of housing output as 30 years ago.
The most dangerous phrase in construction is: “We’ve always done it this way.” – Revizto White Paper
The time to act is now.
Where Are Construction Costs Rising Fastest?
Looking ahead, cost escalation is expected to remain elevated through 2027:
- Brisbane: Forecasted to reach 7.00% in 2025, easing to 6.50% by 2027 due to Olympic-related infrastructure tapering off.
- Sydney & Melbourne: Sitting around 4.50%, driven by slower project pipelines.
- Perth: Tracking at 5.75% in 2025, easing to 4.75% by 2027.
Across all markets, escalation remains well above pre-2021 levels, fuelled by persistent material, labour, and regulatory pressures.
How Technology Reduces Risk and Builds Resilience:
Smart technologies are helping firms de-risk projects, improve delivery certainty, and unlock new efficiencies. Here’s how:
- Digital Twins: Simulate real-world conditions, enabling predictive maintenance and performance forecasting.
- Building Information Modelling (BIM): Enhances design coordination, clash detection, and stakeholder collaboration.
- Off-site Manufacturing & Modular Construction: Reduces on-site labour needs, accelerates timelines, and improves quality control.
- IoT & Smart Sensors: Provide real-time data on material usage, equipment health, and site safety — enabling faster, data-driven decisions.
What to Prioritise in the Next 6–12 Months:
For AEC firms and clients looking to stay competitive, here’s where to focus:
- Audit your digital maturity: Identify gaps in workflows, data sharing, and model coordination.
- Prioritise BIM integration: Especially for government and infrastructure projects where digital delivery is becoming mandatory.
- Explore prefab partnerships: Collaborate with modular builders to reduce on-site dependencies.
- Upskill your teams: Invest in training for BIM, digital twin platforms, and data literacy.
- Pilot IoT on high-risk projects: Start small with sensor-based monitoring for safety or materials tracking.
Budget-Friendly Technology Adoption Roadmap:
| Phase | Timeline | Focus Area | Tools/Approach | Budget Tip |
| 1. Assess | Month 1–2 | Digital readiness | Internal audit, stakeholder interviews | Use free BIM maturity tools (e.g., NATSPEC Quickstart) |
| 2. Prioritise | Month 3–4 | High-impact areas | Target BIM coordination, prefab feasibility | Leverage existing software licenses |
| 3. Pilot | Month 5–8 | Small-scale implementation | IoT sensors, modular trial, digital twin demo | Seek vendor trials or government grants |
| 4. Scale | Month 9–12 | Broader rollout | Integrate platforms, train teams | Bundle training with software procurement |
Further Reading:
WT Construction Cost Pressures to Persist Through 2025 https://www.brokernews.com.au/news/breaking-news/construction-cost-pressures-to-persist-through-2025-wt-287534.aspx
Australia’s Productivity Crisis – API Magazine https://www.apimagazine.com.au/news/article/australia-s-productivity-crisis-deepens-as-construction-costs-defy-global-trends
Build Australia – Cost Escalation Outlook https://www.buildaustralia.com.au/news_article/construction-cost-escalation-in-australia
Builders face daunting mission to boost housing supply despite ‘green shoots’ – ABC News
Cost Escalation in Australia’s Building and Construction Industry
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Ian Ferguson MPM Group
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TOM PURDON MPM GROUP
