- Most construction jobs market indicators show ongoing strong labour demand and skills shortages. Construction employment and hours worked are growing faster than the wider economy, few construction workers are unemployed, and more than half of construction occupations are in shortage.
- Wage pressures and weak productivity growth leave the industry with limited scope to absorb higher labour costs without increasing project costs.
- Housing, energy infrastructure, data centres, health, defence and Brisbane 2032 Olympics and Paralympics projects will drive demand for workers through the late 2020s, with electrical skills the most likely to be in shortage.
- While the Middle East conflict continues to drive immediate cost pressures, labour availability and costs are likely be the major medium-term escalation risk. Early assessment of specialist subcontractor capacity, realistic delivery programs and well-timed procurement will be important as activity increases.
Strong construction activity sustains demand for workers
The construction labour market remains tight, with most construction jobs market indicators showing strong labour demand and ongoing skills shortages. Conditions vary across the country, with greater pressure in Queensland, Western Australia and South Australia than in New South Wales and Victoria.
Record construction activity is underpinning strong demand for labour. Construction work done reached $328 billion in 2025–26, up 4.2% on the previous year.
Construction employment and hours worked are growing strongly. Construction employed 1.35 million people in the June quarter 2026, up 4.9% over the year, compared with employment growth of 2.6% across the economy. Construction hours worked increased by 6.9%, almost three times the economy-wide increase of 2.4%
Elevated construction job advertisements and job vacancies point to ongoing strong labour demand. Construction job advertisements remain above pre-COVID levels nationally, although below their 2022–23 peak (Chart 1). State differences are pronounced, with advertisements in Queensland, Western Australia and South Australia well above 2019 levels, while advertisements have fallen in Victoria.
The construction industry job vacancy rate remains elevated, but below the post-COVID period when skills shortages peaked (Chart 2).
Another indicator of a strong construction labour market is that the number of unemployed construction workers is relatively low. In March 2026, around 30,000 construction workers were unemployed, well down from the 40,000 to 50,000 in the years before the pandemic.
Jobs and Skills Australia’s (JSA) 2025 Occupation Shortage List shows that construction skills shortages remain widespread and are much more severe than across the whole economy. In 2025, 59.8% of ‘Core construction’ roles were classified by JSA as in shortage, compared with 26.0% of other occupations (Table 1). Under a broader definition of construction worker (that includes occupations such as work health and safety manager and interior designer), the corresponding shares were 53.8% and 23.2%.
TABLE 1: OVER HALF OF CONSTRUCTION JOBS ARE IN SHORTAGE
| OCCUPATION GROUP | IN SHORTAGE | NO SHORTAGE | TOTAL ROLES | % IN SHORTAGE | % NO SHORTAGE |
|---|---|---|---|---|---|
| Core construction | 49 | 33 | 82 | 59.8% | 40.2% |
| Broad construction | 98 | 84 | 182 | 53.8% | 46.2% |
| Other occupations excluding core construction | 244 | 696 | 940 | 26.0% | 74.0% |
| Other occupations excluding broader construction | 195 | 645 | 840 | 23.2% | 76.8% |
Notes: RLB classification of core and broader construction roles. Source: Jobs and Skills Australia, 2025 Occupation Shortage List.
Strong wage growth is compounded by weak productivity growth, adding to cost pressures
Elevated construction activity and a shortage of workers are flowing into higher construction labour costs, although the strength of wage growth differs across measures.
The construction Wage Price Index increased by around 3.3% over the year to June 2026, broadly in line with the wider economy (Chart 3). Enterprise agreement data shows stronger increases for workers covered by these agreements, with construction wage growth about 1.5 percentage points above the all-industry average. Recently approved construction enterprise agreements have had slightly stronger wage growth than the stock of all workers covered by agreements.
Stronger agreement outcomes can create greater cost pressure on projects that rely heavily on this workforce, such as public infrastructure projects, even when average industry wage growth is slower.
Many construction enterprise agreements are due to expire in 2027, creating a further source of uncertainty for contractors pricing work extending into that period. Broader wage pressure following several years of high inflation, together with industrial action or threatened action across the public and private sectors, could influence the upcoming construction enterprise agreement negotiations.
Weak productivity growth compounds these wage pressures. Over the past 25 years, construction labour productivity was broadly unchanged, compared with average annual growth of 1.4% across the market sector (Chart 4). Construction multifactor productivity, which measures how efficiently labour and capital are used together, declined by an average of 0.5% a year, compared to 0.4% annual growth in the market sector. Without sustained productivity improvements in output per hour worked, higher wages flow more directly into project costs. Promisingly, RLB’s September quarter Construction Market Update identified some signs of improvement.
Labour shortages are likely to worsen in the coming years, adding to cost pressures
The strong forward pipeline of construction work is likely to intensify competition for construction workers through the late 2020s. The elevated pipeline is driven by data centre construction in Sydney and Melbourne, residential and non-residential building in Queensland and Perth, major defence and health programs, energy infrastructure and the Brisbane 2032 Olympics. Projects running concurrently will compete for specialist trades, experienced project teams and subcontractor capacity, with the greatest pressure depending on the location and timing of delivery.
Numerous reports have forecast a substantial increase in labour demand, and a shortfall in the required construction workforce in the coming years (see Table 2). Electrical skills shortages are likely to be the most severe, with overlapping demand from energy projects, housing and data centres. Strong demand is also forecast for carpenters, plumbers, construction managers and civil engineers. Delays and changes to project sequencing could spread demand and reduce peak pressure, while keeping requirements elevated for longer.
TABLE 2: CONSTRUCTION WORKFORCE SHORTAGES ARE FORECAST TO INTENSIFY
| REPORT | FORECAST SHORTAGES OR WORKFORCE REQUIREMENTS | OCCUPATIONS FACING THE BIGGEST SHORTFALL |
|---|---|---|
| Infrastructure Australia: Infrastructure Market Capacity Report 2025 | Shortfall peaks at more than 300,000 in mid-2027, against workforce demand of 521,000. | Engineers, architects and scientists: 126,000 shortfall in late 2026. Trades and labourers: 126,000 shortfall in mid-2027. |
| Construction Skills Queensland: Horizon 2032, 2026 edition | Queensland shortfall peaks at 35,000 in 2027-28; averages 19,100 annually over 2025-26 to 2031-32. | Carpenters, plumbers, electricians, painters and labourers; concreters, plant operators, construction managers and civil engineers. |
| Powering Skills Organisation: High Load, Short Supply, 2026 update | 42,000 additional energy trades workers required by 2030, plus ~17,000 for housing and 13,000 for data centres | Electricians, air-conditioning/refrigeration mechanics, electrical and electronics trades, technicians and engineers. |
| Victorian Skills Authority: Victorian Skills Plan 2025 | 64,500 construction workers needed during 2025–28 | Carpenters/joiners, construction managers, plumbers, civil engineering professionals, electricians |
| AEMO/UTS: The Australian Electricity Workforce for the 2024 Integrated System Plan: Projections to 2050 | Under Step Change scenario, the electricity sector workforce must rise by 33,000 to 66,300 workers by 2029 | Carpenters, electricians, plumbers, builders, labourers, painters and concreters. |
| BuildSkills Australia: Housing Workforce Capacity Study 2025 | To deliver the Housing Accord, 116,700 extra construction workers above the business-as-usual baseline | Carpenters, electricians, plumbers, builders, labourers, painters and concreters. |
Workforce supply will take time to respond. Apprenticeship commencements are not keeping pace with projected energy workforce demand. Slower forecast migration and the relatively small number of visas issued to construction workers limit the scope for migration to provide immediate relief. Training completions, retention and pathways into construction will be important to expanding capacity.
Productivity improvements could boost output and ease the scale of the training and recruitment task. For example, BuildSkills Australia estimates that a 5% increase in productivity by 2029 through modern methods of construction (MMC) and other innovations could mean that 30,000 fewer workers would be required to meet demand from the residential construction sector. Its separate MMC report identifies targeted upskilling among designers, engineers, estimators, project managers and other professionals as a priority for growing this small, but potentially important, sector.
For clients, while the Middle East conflict is driving immediate cost pressures, labour availability and costs are likely be the major medium-term escalation risk. Early assessment of specialist subcontractor capacity, realistic delivery programs and procurement timed to local market conditions will be important as construction activity increases.
Stay ahead of construction costs
Get the latest on escalation, labour markets and tender conditions in RLB’s September quarter Construction Market Update.
Photo Credit: “Karolis Kavolelis / Shutterstock.com”
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