ACIF Forecasts – valuable ACA member benefit
Australia’s building and construction industry faces a challenging year ahead amid rising inflation, higher interest rates and increasing economic uncertainty, according to the May 2026 ACIF Forecasts. After expanding by 3.6% in 2025, the industry is now forecast to contract by 0.8%, highlighting growing challenges for residential construction, project viability and investment confidence.
The Australian Construction Industry Forum Forecasts (worth $400+) are produced every six months by the ACIF forecasters, with the Construction Forecasting Council providing guidance and oversight. ACA members have free access to the Australian Construction Market report Datapack as a member-only benefit.
ACA members can access the latest May 2026 Datapack below. Log in to access.
ACIF has provided the following summary of the May 2026 Forecasts.
The May 2026 update of the ACIF Forecasts projects that growth in the industry could be brought to a standstill. This is in sharp contrast to the 3.6% growth seen over 2025. The building and construction industries now must endure a reversal of policy settings that could send performance backwards. This could lead to a contraction in work done of 0.8% in 2026.
Nerida Conisbee, Chair of ACIF’s Construction Forecasting Council, commented “since the November 2025 report, the operating environment has shifted materially. What had looked like a cautiously managed soft landing has become a more difficult and volatile outlook. The surge in fuel prices, renewed inflationary pressure and the prospect of higher interest rates are expected to weigh heavily on demand, project feasibility and margins.”
“After solid growth in 2025, the May 2026 forecasts point to total building and construction work potentially moving backwards in 2026. Residential building remains central to the industry’s outlook, but it is also the sector most exposed to changes in household borrowing capacity and confidence.”
“Higher interest rates are expected to slow growth in new houses and alterations and additions, even as demand for housing remains underpinned by population growth and the continuing need to address Australia’s housing supply challenge. Encouragingly, new other residential dwellings, including apartments and townhouses, are expected to show greater resilience, supported by policy priorities, planning reform and the ongoing need for more diverse housing supply,” Ms Conisbee concluded.
The report makes clear that the National Housing Accord target remains difficult to achieve without meaningful progress on productivity, approvals, labour capacity and cost pressures. Non-residential building also faces a more uneven outlook. Strength in data centres, defence facilities and selected commercial projects is helping to support parts of the market, but this is being offset by weaker conditions in offices, industrial, retail and wholesale trade. Infrastructure construction provides some relief, particularly through electricity, pipelines, water and sewerage projects that support the clean energy transition.
According to ACIF Chief Forecaster Kerry Barwise: “There are many uncertainties in these forecasts. The possibility of a prolonged conflict in Iran weighs heavily on the outlook for the building and construction industry, as it does for the economy at large.”
“The forecasts reflect the knowledge that this industry is particularly exposed to the impact of changes in interest rates. This impacts on demand and on costs, compressing margins and placing more stress on an industry that already tops the industry count for insolvencies. It is also very difficult to assess the full impact of recent policy changes.”
“Withdrawal of budget ‘tax expenditures’, such as negative gearing provisions in personal income taxation, may discourage investment in residential building, but it may also redirect investment into other asset classes, including commercial property, property trusts and managed funds. The increase in uncertainty is possibly the gravest threat. It is very difficult for buyers and sellers to anticipate all the myriad fundamentals that are shifting in the winds of change right now. It is hard to anticipate how this plays out, but higher costs and higher risk generally result in less investment and growth,” Mr Barwise concluded.
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