Prepare for building inflation to surge again

WA and Queensland face biggest hit

Cost escalation fell as low as 2.6 per cent last year in some sectors but will pick up again in a booming infrastructure market, the consultancy’s Construction Costs and Inflation report says.

Separate forecasts last month from the Australian Construction Industry Forum, a peak industry body, estimate a 10 per cent jump in non-mining infrastructure spend this year to $96.1 billion from $87.4 billion in 2023, rising to $99.7 billion in 2026.

While housing construction is softening, it will pick up from $112.4 billion in 2025 to $116.6 billion in 2027, the ACIF report predicts, at the same time as non-residential construction and mining infrastructure work also generally increase.

The increase in costs that could “easily” add $200 million to a multi-year $1 billion megaproject by the end of the decade, hitting Western Australia and Queensland hardest, Mr Hart said.

Housing construction needed to embrace techniques such as prefabrication that would make it more efficient, while infrastructure projects could become more efficient simply by managing risk better, Mr Hart said.

“When you look at historical data the productivity story in the construction` industry has been terrible,” he said.

“The biggest productivity killer in the broader infrastructure industry is making mistakes and having to fix them. If we can eliminate mistakes we’ll go a long way towards boosting productivity across the sector.”

Price of mistakes

Some social infrastructure projects delayed by mistakes will have come to completion amid rising costs.

In Melbourne’s inner-eastern Kew, where the site of a $73 million recreation centre has lain quiet since a potentially fatal collapse of the roof structure mid-build in October 2022, the local council has yet to say how much it will have to pay to complete the gym and swimming pool project.

Industry sources last year put the cost to complete the centre, which will have basketball courts, a gym and training studios, creche and outdoor play areas, at $130 million.

In November Boroondara Council extended the contract of architect Williams Ross Architects – which was originally due to end in mid-2023 – to late 2026 and allocated a further $172,000, lifting the value of that contract to $3.6 million.

It also extended the contract of project manager Turner & Townsend Thinc by three years to late 2026 and the contract by a further $455,200 to a total $824,800.

But the council – which last year publicly slapped down builder Adco Constructions for making what it said were unsupported claims about design flaws in the structure that crashed to the ground – has yet to revise its budget, even though last month it said work would resume.

An amended building permit had been issued and the municipal building surveyor had lifted a stop-work order on the site, the council said.

“The builder has been instructed to proceed and there has been no change in council’s budget for the construction costs of Kew Recreation Centre,” a council spokesman said on Friday.

In November the council put “early 2026” as the likely completion date. It gave no updated timeline for completion last week.