Australia Construction Market Size, Share, and Trends: Forecast and Growth Analysis Report (2026-2035)

How large is the Australia construction market, and where is it heading?

Quick Answer

The Australia construction market encompasses residential building, non-residential building, and engineering construction (roads, railways, utilities, energy infrastructure, and mining). ABS reports a quarterly trend estimate of ~AUD 80 billion in total construction work done as at December 2025, annualising to ~AUD 320 billion. Infrastructure Australia identifies AUD 1.14 trillion of total construction demand across public and private investment for FY 2024-2025 to FY 2028-2029. Growth is driven by engineering construction, particularly utilities, renewables, data centres, defence, and health, while residential lags the National Housing Accord's 1.2 million target. The construction market is projected to reach AUD 451.43 billion by 2035 at a 3.5 per cent CAGR, with a 141,000-worker shortfall (October 2025) the defining delivery constraint.

Market Overview

The Australia construction market is one of the biggest parts of the national economy, and right now it's in an unusual position: more work than it can physically deliver. Infrastructure Australia's 2025 Infrastructure Market Capacity Report (November 2025) identifies AUD 1.14 trillion of total construction demand across public and private investment for the five years from FY 2024-2025 to FY 2028-2029, the highest-volume pipeline in five years of annual tracking. The Major Public Infrastructure Pipeline, government-funded projects tracked at the project level, has grown to AUD 242 billion over five years, a record high and 14 per cent above the prior year.

Engineering construction is doing the heavy lifting in 2025. Total construction work done grew 3.1 per cent year-on-year in Q3 2025, but engineering construction grew 6.1 per cent year-on-year in H1, driven by utilities, energy, and transport projects. Building construction grew 2.1 per cent in the same period: positive, but reflecting a residential sector recovering slowly from a genuinely difficult few years. By September 2025, building work done had risen 3.8 per cent to AUD 43.2 billion. The direction is up across the Australia construction market, though pace varies significantly by segment.

Housing is where the policy pressure is most acute. The National Housing Accord, signed by federal and state governments and the building market in 2023, set a target of 1.2 million new dwellings by 30 June 2029, requiring 240,000 new starts every year from July 2024. Australia commenced roughly 176,000 new dwellings in FY 2023-2024 per the Productivity Commission, well short of target. The NHSAC's 2025 State of the Housing System projects only 938,000 dwellings will actually be built by mid-2029, putting the shortfall at 262,000. The gap is real, it's large, and the structural reasons aren't going away quickly.

Key Market Trends and Insights

• Renewable energy is now the biggest pipeline growth driver: Infrastructure Australia's 2025 report puts the renewable energy construction pipeline at AUD 163 billion over five years, almost all privately funded (transmission, solar, wind, pumped hydro). Oxford Economics projects electricity construction will grow more than 33 per cent to above AUD 25 billion annually by 2030.
• Transport infrastructure is peaking now and will moderate: Transport projects account for AUD 129 billion of the five-year Major Public Infrastructure Pipeline. The peak hits around AUD 50 billion in FY 2025-2026, driven by Sydney Metro, Melbourne Metro Tunnel, METRONET, and Cross River Rail. From FY 2026-2027, spend falls significantly as these projects near completion.
• The National Housing Accord is severely behind target: Australia commenced around 176,000 dwellings in FY 2023-2024, the weakest year for home building in more than a decade. The NHSAC projects 938,000 total dwellings by mid-2029 versus the 1.2 million target. Dwelling commencements rose 6.6 per cent to 48,778 in the September 2025 quarter: a meaningful uptick from a very low base.
• The worker shortage overrides everything else: Infrastructure Australia puts the construction worker shortage at 141,000 as at October 2025, projected to surge past 300,000 by mid-2027. Regional shortages will quadruple between 2025 and 2027. 63 per cent of firms cited labour cost and 59 per cent cited labour and skills shortages as substantial threats to project delivery.
• Construction insolvencies remain elevated after a brutal cost cycle: Building construction prices rose 31.1 per cent between September 2020 and June 2024. House construction costs climbed 40.8 per cent. Construction sector insolvencies rose 65.9 per cent year-on-year in the first 11 months of 2024, following 48.8 per cent growth in 2023.

Australia Construction Market Size and Forecast

Key Takeaways: Australia Construction Market

The Pipeline Is at a Record High but the Market Cannot Yet Deliver It

Infrastructure Australia's 2025 Market Capacity Report was prepared at the direct request of the Prime Minister and all Premiers and Chief Ministers, which tells you how seriously governments are taking capacity questions. The five-year Major Public Infrastructure Pipeline is AUD 242 billion, a record since tracking began in 2020. Total construction demand across public and private investment hits AUD 1.14 trillion for FY 2024-2025 to FY 2028-2029. The pipeline itself isn't the problem: total construction work done across the five years from FY 2020-2021 to FY 2024-2025 was AUD 1.4 trillion, so the forward pipeline is actually slightly below recent actuals. The capacity to deliver it is the real constraint.

The Housing Shortfall Is Structurally Embedded and Economically Damaging

The National Housing Accord's 1.2 million target is probably the most consequential housing policy commitment in Australia's post-war history, and it's almost certain not to be met. The NHSAC projects 938,000 dwellings (262,000 shortfall); the UDIA puts the capital city shortfall at 400,000 by 2029; the HIA says 60,960 fewer homes were commenced in FY 2024-2025 than needed annually to hit the target. The Productivity Commission's 2025 research found dwelling construction contributed ~3 per cent of GDP annually over the past decade, with expenditure reaching AUD 139 billion in the year to June 2024. The structural barriers (planning delays, materials costs up 31-41 per cent since 2020, insolvency rates 65 per cent above the prior year, a 90,000-worker shortage per BuildSkills Australia) aren't temporary shocks.

Renewables and Data Centres Are the New Long-Cycle Growth Drivers

The AUD 163 billion renewable energy construction pipeline over five years, mostly privately funded solar, wind, transmission, and pumped hydro, represents a structural expansion of engineering construction demand that will extend well beyond the forecast period. Oxford Economics projects electricity construction growing 33 per cent-plus to above AUD 25 billion annually by 2030. Data centres are adding a new typology: the AUD 100-plus billion hyperscaler pipeline brings facilities with high power density, liquid cooling, and long-term PPA requirements. Water-related construction has risen 55 per cent in real terms over three years. Defence harbour and base construction is beginning a new AUKUS-driven cycle.

Key Insight

Infrastructure Australia's 2025 Market Capacity Report finds demand has increased 14 per cent on the prior year to a record AUD 242 billion for the five-year public pipeline, reinforced by the parallel finding that the worker shortage is deepening and peaking later than previously projected. The Australia construction market faces an unprecedented demand surge at precisely the moment its capacity is most constrained. Resolving this paradox requires productivity-enhancing investment (Modern Methods of Construction, modular building, digital twins, AI-driven project management) rather than simply adding workers to a labour pool that doesn't exist.

Key Trends and Recent Developments in the Australia Construction Market

Several things happened simultaneously in FY 2024-2025 that define the Australia construction industry's current character. Residential was recovering but well below policy targets. The public infrastructure pipeline hit record highs. Renewable energy emerged as the dominant new engineering workload. And Infrastructure Australia's annual capacity report documented a 141,000-worker shortfall getting worse, not better.

Infrastructure Australia 2025 Market Capacity Report, November 2025

Infrastructure Australia released its 2025 Market Capacity Report in November 2025: the fifth consecutive annual assessment of supply and demand in the Australian construction sector, and the most significant to date. The report confirmed the five-year Major Public Infrastructure Pipeline at a record AUD 242 billion, with total construction demand from public and private sources at AUD 1.14 trillion for FY 2024-2025 to FY 2028-2029. CEO Adam Copp didn't soften the message: governments are doubling down on energy transmission and housing while continuing major transport projects, and the added demand will not come without challenges: productivity growth remains sluggish, and worker shortages present significant delivery risk.

• Worker shortage at 141,000 as at October 2025, projected to reach 300,000-plus by mid-2027 as renewable energy projects ramp up in regional areas where the labour pool is thin.
• Peak workforce demand revised up from 417,000 to 521,000 and pushed back from mid-2026 to mid-2027: the third consecutive year the peak has been revised upward and out.
• 63 per cent of firms surveyed cited labour cost as a substantial threat to project delivery; 59 per cent cited labour and skills shortages.
• Ten regional hotspots across NSW, Queensland, and Tasmania will see public investment more than double over the next four years. Utilities accounts for ~60 per cent of hotspot demand.

National Housing Accord: Severe Shortfall Against 1.2 Million Target

The Accord, signed by governments and industry in 2023, targets 1.2 million well-located new homes by 30 June 2029, backed by a AUD 43 billion commitment to 55,000 social and affordable homes under Homes for Australia. The gap between ambition and deliverable reality is the problem. NHSAC 2025 projects 938,000 dwellings (262,000 shortfall); UDIA forecasts 400,000 fewer in capital cities by 2029; Master Builders Australia confirmed 158,690 FY 2023-2024 starts, the weakest in over a decade. The Productivity Commission's 2025 paper is blunt: no or negligible labour productivity growth in dwelling construction. ABS September 2025 showed commencements rising 6.6 per cent to 48,778, and residential work done was 8.0 per cent higher year-on-year in the December 2025 quarter. The trend is turning, from a structurally low base.

Construction Insolvency Crisis and Cost Escalation, 2023-2025

Companies filing for insolvency in the sector rose 48.8 per cent in 2023 and a further 65.9 per cent year-on-year in the first 11 months of 2024. The root cause was a collision most in the sector saw coming: fixed-price contracts signed during the pandemic, when materials and labour costs looked stable, ran into a cost escalation cycle that pushed building construction prices up 31.1 per cent between September 2020 and June 2024 and house construction costs up 40.8 per cent. Large residential and commercial builders across Queensland, Victoria, and NSW went into liquidation. Construction unemployment fell to a record low of 3.2 per cent in early 2025: tight labour market plus skills shortage plus pipeline expansion is a difficult combination.

Australia Construction Market Segmentation

Market Breakup by Sector

• Residential Building: Recovering from a structurally low base. Dwelling commencements rose 6.6 per cent in Q3 2025 to 48,778. Residential work done was 8.0 per cent higher year-on-year in December 2025, encouraging but well below the 240,000 annual target.
• Non-Residential Building: AUD 16.6 billion in Q3 2025, up 3.7 per cent. Drivers include health and education infrastructure, data centres, and defence facilities. A stable contributor to the Australia construction market.
• Engineering Construction: The growth engine. Up 6.1 per cent year-on-year in H1 2025. Renewable energy (AUD 163 billion five-year pipeline), transport (AUD 129 billion), utilities (AUD 36 billion) and water infrastructure are driving sustained demand.

Market Breakup by State and Territory

• New South Wales: The largest Australia construction market. Sydney Metro extensions, Western Sydney Airport and Aerotropolis, Liverpool and Westmead hospital redevelopments, and the growing data centre cluster in western Sydney.
• Victoria: Oxford Economics puts Victoria's rolling capital programme at ~AUD 19.3 billion annually. Focused on the Suburban Rail Loop, Metro Tunnel completion, hospital expansions, and schools. Peaked around FY 2023-2024 before normalising.
• Queensland: The pipeline is firming around Brisbane 2032 Olympics infrastructure and defence. The AUD 5.75 billion Logan and Gold Coast Faster Rail is among the larger current commitments. Renewable energy in Mackay-Isaac-Whitsunday adds major civil workload.
• Western Australia: Forecast for the strongest growth trajectory among major states. Resource megaprojects, population inflows, and clean energy. WA's legislated coal exit by 2030 sustains grid and storage procurement.

Competitive Landscape and Key Contractors in the Australia Construction Market

The Australia construction market has a small number of large, integrated contractors capable of managing major public infrastructure and complex building projects, sitting above a very large base of 80,000-plus SMEs that supply specialist trades, materials, and sub-contract services. The majors can't function without them, and the health of the SME tier directly affects the capacity of the sector as a whole.

CPB Contractors

Australia's largest civil infrastructure and engineering contractor, a division of CIMIC Group (ASX: CIM). On most of the country's largest transport projects: Sydney Metro, NorthConnex, Melbourne Metro Tunnel, Snowy 2.0. Covers road, rail, tunnelling, marine, and resources construction nationally.

Lendlease Group

One of Australia's largest integrated property and construction groups, active across building, infrastructure, and urban development. Primary contractor on major hospital, commercial, and mixed-use projects. Genuine commitments to modular and industrialised construction through off-site manufacturing.

John Holland

Major contractor across civil infrastructure, rail, and building; majority-owned by China Communications Construction Company. Key projects include Melbourne Metro Tunnel, Geelong Fast Rail, and Cross River Rail. Moving into data centre and utilities construction as transport moderates.

Laing O'Rourke

Private UK-origin contractor with significant Australian operations. The most consistent advocate for Modern Methods of Construction and Design for Manufacture and Assembly. Active across transport, health, energy, and commercial. Arguably best positioned for any government MMC procurement push.

Downer Group

ASX: DOW. A leading integrated services provider for transport and infrastructure sectors, covering roads, rail, and utilities maintenance and construction. Active in road and rail maintenance, providing counter-cyclical stability alongside capital works.

Other significant participants include Multiplex (Brookfield), Built Environs, BMD Group, Georgiou Group, Besix Watpac, Hansen Yuncken, and Fulton Hogan. The 80,000-plus SMEs underpin all of this: they supply the trades workforce and specialist sub-contracting that major projects depend on.