ACIF Forecasts – May 2025
The Australian Construction Industry Forum (ACIF) Forecasts were released in May 2025, forecasting that the residential construction recovery will continue to gather momentum. The May Forecasts highlight that growth is expected to increase to 1.9% in 2025–26, buoyed by lower interest rates lifting demand. Despite ongoing challenges in the industry, growth is expected to strengthen once again from 2026–27 with total building and construction expanding to $351 billion (+3.1%).
ACA members have free access to the ACIF Customised Forecasts dashboard. Head here for access and more information.
The Australian Construction Industry Forum has provided the following summary.
The May 2025 ACIF Forecasts project that construction work will reach $334 billion in 2024–25, growing by 1.6%. Growth is expected to increase to 1.9% in 2025–26, buoyed by lower interest rates lifting demand. However, the industry still faces challenges such as high materials costs, planning delays, skills shortages, poor productivity, and lingering threats to subcontractor solvency. Growth is expected to strengthen from 2026–27 with total building and construction expanding to $351 billion (+3.1%). This will be supported by further relaxation of interest rates over calendar year 2025 and into 2026, a recovery in business investment in building projects especially in building of large data centres, and sustained growth in demand including from robust population growth.
Residential Building has turned around, and the recovery is gathering momentum. The prospect of interest rate reductions has been sufficient to reignite some growth raising approvals, commencements and the glimmer of additional building activity. Most of this has been in stand-alone houses, which always respond quickly to cyclical changes. Now the question will turn to the capacity of the housing supply industry to respond. Higher costs, shortages of key skills and concerns about insolvencies still weigh on the industry, particularly for builders of apartments and attached dwellings. The forecasts project a slow recovery phase, with growth of 1% this year, accelerating to around 3% next year and the year after.
Double digit growth in Infrastructure will moderate over this year and into next. Growth in large-scale public transport projects has peaked and work is now tapering down. Industry is now pivoting towards a wave of projects in renewable or clean energy supply and in water. Announcements about very large major projects in this area have been piling up over recent years. Approvals processes have delayed some of the larger proposals. Nevertheless, work done is expected to lift to between $108 billion and $113 billion over the next three years.
In Heavy Industry including Mining, work coming into the pipeline is in response to demand for gold and minerals like lithium and copper that are critical in supporting the clean energy transition. Other project work relates to extensions or enhancements of existing facilities. Strong growth of more than 6% is projected over 2024–25. This is an area where recent disruptions in international trade may add uncertainty and delay some investment. Growth is projected to moderate in 2025–26 to under 1%, followed by a rebound to 4% in 2026–27.
Non-Residential Building activity will contract in 2024–25, reflecting lacklustre leading indicators about business investment and falls in building approvals. The situation for Accommodation, Education, Entertainment and Recreation and Retail was quite precarious, with contractions in work done recorded last year. These areas are again in doubt this year, joined by Offices and Industrial. Overall, a contraction of 5% is foreshadowed this year. Interest rate reductions and improved business demand is expected to lift activity next year and the year after, including through the building of many of the large data centres that have entered into the development pipeline recently.
ACIF experts provided the following commentary.
“Several factors could affect this outlook. While the direct effects on Australia from US tariff increases may be modest, indirect effects like impacts on consumer confidence and investment could delay and derail much of the growth that is in the forecasts.”— Kerry Barwise, ACIF Chief Forecaster
“The RBA might see trade disruptions as deflationary for the global economy but could still pause on the next rate cuts to assess the situation. Skilled labour shortages and poor productivity might push builders to raise prices, dragging down affordability and growth.” – Nerida Conisbee, Chair of ACIF’s Construction Forecasting Council
“While affordability remains challenging, recent data indicates that we may have passed the trough for residential construction. This suggests we may escape with a “soft landing” with new demand picking up just as backlogs created under the Homebuilder scheme reduce.” —Andrew Scott, Deputy Chair of ACIF’s Construction Forecasting Council
ACIF Forecasts are rolling ten-year forecasts of demand across residential, non-residential and engineering construction in Australia. The Forecasts are prepared by respected economic modellers, using high quality data sources, and are overseen by ACIF’s Construction Forecasting Council, an industry panel of expert analysts and researchers.
ACA members have free access to the ACIF Customised Forecasts dashboard (usually $385), an online portal where users can query the full ACIF Forecasts database on 20 work types, over a twenty year period. Head here for access and more information.
An extensive Australian Construction Market Report is also available to purchase. The Report gives businesses interested in the prospects of the building and construction industry accurate, credible analysis by state and for the nation overall on the indicators of demand.