In May and June 2025, the Reserve Bank of Australia (RBA) made comments regarding commercial construction in Australia.
The RBA’s remarks focused on the normalisation of construction cost growth, with some firms reporting a decrease in insurance cost growth and tentative signs of slowing growth in freight and some technology costs. However, construction cost escalation remains above historical averages in most markets, despite a plateauing trend.
Here’s a more detailed breakdown:
RBA’s May/June 2025 Comments:
- Normalisation of Construction Costs:
The RBA noted that growth in construction costs was returning to more normal levels, suggesting a decrease in the rapid cost escalation seen in previous periods.
- Insurance Costs Decreasing:
Some firms reported a decrease in insurance cost growth, indicating a positive trend in this area.
- Freight and Technology Costs:
Tentative signs suggested that growth in rates for land and sea freight, as well as some technology costs, might slow down in the near future.
- Overall Economic Conditions:
The RBA’s comments were made within the context of broader economic conditions, including slowing economic growth and inflationary pressures.
Other Relevant Observations:
- Construction Activity:
While cost escalation may be normalising, construction activity remains high in many markets.
- Labour Shortages:
The construction sector continues to face challenges related to labour shortages and the availability of a skilled workforce.
- Cost of Materials:
Rising energy costs, particularly for brick and concrete production, are impacting construction costs.
- Interest Rates:
The RBA’s May interest rate cut aimed to stimulate economic growth and improve housing affordability.
- Vacancy Rates:
Commercial property markets, particularly the office sector, are experiencing high vacancy rates.
In summary, the RBA’s comments in May and June 2025 indicate a shift towards normalisation in construction cost growth.
However, the sector still faces challenges related to labour shortages, rising material costs, and overall economic uncertainty.
To see how Infinity Constructions navigates industry trends and cost challenges, explore our recent commercial construction projects across Sydney and Melbourne.
