The State’s construction sector is almost through a brutal period of rising costs but there’s a risk the challenge will re-emerge.
Oxford Economics Aust-ralia forecasts that the industry’s costs lifted 4 per cent through the 2024 financial year, with falling steel prices helping ease the strain in the under-pressure sector.
That’s down from an excruciating 8.2 per cent in 2023, as measured by the Australian Bureau ofJU Statistics.
But the painful price hikes for builders were slowing rather than reversing, the consultancy said.
Oxford Economics senior economist Thomas Westrup said domestic factors were increasingly responsible for cost pressure.
“Without substantial improvements in construction industry productivity, this presents risks forJU a significant reacceleration in construction cost escalation later this decade,” he said.
Oxford believes the price of a $1 billion project could rise by another $200m by the end of the decade.
“Cost growth will likely be even higher in States such as Queensland and Western Australia where growth in construction activity and demand will be strongest.”
Oxford pointed to a potential wages breakout as a key threat.
The consultancy said ABS data showed construction wage growth had lifted from 1.5 per centJU to 4 per cent and upcoming enterprise bargaining deals could lock inJU further rises.
Also risking cost drama were a series of strongJU targets for new homesJU and infrastructure which could add to demand-side pressure, Oxford said.
The Federal Government wants to build 1.2JU million homes by 2029.