ACIF Forecasts Project Slower Growth
The November 2025 update of the Australian Construction Industry Forum (ACIF) Forecasts projects one more year of slower growth ahead. The soft landing in the economy engineered by the RBA has squeezed out inflation, but it has also put a squeeze on growth in building and construction work.
The stronger-than-expected November inflation result has revived speculation that the Reserve Bank of Australia may need to lift interest rates again. However, the broader evidence, outlined in the Australian Construction Industry Forum’s (ACIF) upcoming Australian Construction Market Report (November 2025), points in the opposite direction. Although inflation came in higher than expected, construction activity is now slowing sharply, with new project starts, employment growth and cost pressures all easing across the sector.
The construction sector, one of the largest domestic drivers of price growth over the past two years, is now slowing markedly. ACIF’s latest forecasts show total building and engineering activity rising by only 1.6 per cent in 2025-26, compared with 2.7 per cent the year before. Wage growth has already moderated, easing from 4.1 per cent in 2023-24 to 3.4 per cent in 2024-25. Materials price inflation has flattened, and major infrastructure work is tapering off. Together, these developments are easing cost pressures across the economy and reducing one of the main sources of domestic inflation.
The Australian Bureau of Statistics also today (November 2nd) released its monthly building approvals data for October 2025 for detached houses and multi-units covering all states and territories. “New dwellings approved for construction decreased by 6.4 per cent in the month of October 2025 to 15,830,” stated HIA Senior Economist Maurice Tapang.
“This month’s decline was due to a 2.0 per cent decrease in detached approvals and a 12.1 per cent decline in multi-unit approvals, particularly in New South Wales and Victoria,” added Mr Tapang.
“Despite the monthly decline in approvals, this brought the volume of new housing approvals in the 12 months to October 2025 to 192,100, which remains 12.6 per cent higher compared to the previous year,” he added.
Nerida Conisbee, Chair of ACIF’s Construction Forecasting Council, commented, “One of the most striking findings from the report is the sharp fall in the pipeline of new development. The value of projects entering ACIF’s Major Projects Database dropped by more than half over the past year – from $338 billion in the twelve months to October 2024 to just $152 billion by October 2025. The number of new projects also fell by nearly a quarter, with the steepest declines in large-scale engineering projects which lost around 70 per cent in real value.”
“The work is not disappearing but there is much less of it entering the development pipeline. This points to a substantial moderation in construction demand through 2026, reinforcing the downward pressure on costs and wages already emerging in the data. For monetary policymakers, it provides clear evidence that capacity constraints are easing and that inflationary risks from the construction sector are receding.”
Shift in capacity to meet homebuilding targets
According to Kerry Barwise, ACIF Chief Forecaster, “The slowdown also has implications for housing supply. As large infrastructure and commercial projects wind down, construction capacity can shift toward residential building, helping to address housing shortages. If supported by planning reform and improved productivity, this transition could moderate housing cost pressures over time and provide a more balanced pattern of investment across the industry.
“Based on this outlook, ACIF expects the Reserve Bank to hold the policy rate steady through most of 2025 before beginning a gradual easing cycle toward the end of the year. While some have interpreted the latest CPI as evidence that monetary tightening may need to resume, ACIF’s analysis suggests that the slowdown in construction is already offsetting much of that pressure, keeping the case for 2025 rate cuts intact. Taken together, the data point to a cooling but stabilising construction sector – one that is helping, not hindering, the path back to lower inflation and interest rates.” Mr Barwise concluded.
