Australian Construction Index Remains in Contraction

The Ai Group Industry Index for Australia’s construction sector improved modestly by 8 points to -26.9 in October 2026, recovering from the previous month but remaining firmly in contractionary territory. The sector continued to face pressure from rising costs, labour shortages and tight cash flow, while subdued investment and cautious clients weighed on the pipeline of new projects.

The Ai Group Industry Index for Australia’s construction sector fell sharply to -34.5 in September 2026 from a downwardly revised 4.7 in the previous month, indicating a significant deterioration in construction activity. Builders reported weak customer confidence, low enquiry levels and subdued activity, while broader economic uncertainty continued to weigh on demand. Loan and lease approvals also took longer as lenders became more cautious about credit risks and exposure. Input cost pressures were the biggest drag, with wage increases adding further strain for businesses.

The Ai Group Industry Index for Australia’s construction sector jumped to -6.9 in August 2026 from a revised -43.5 in the previous month, marking its highest reading since January and signalling a sharp improvement in conditions. However, businesses continued to report uncertainty stemming from taxation changes and the Federal Budget, as well as volatility in energy markets, with some respondents finding it difficult to forecast demand. Cost pressures also remained elevated, with businesses citing higher supplier prices, fuel levies, and raw material and energy costs. Labour shortages continued to constrain activity, particularly due to a lack of skilled trades, difficulties sourcing and retaining staff, and increased competition for workers amid a low-unemployment environment.