New Zealand’s infrastructure construction sector is showing resilience despite continued weakness across the wider construction market, according to RLB’s Third Quarter 2026 Infrastructure Forecast report, New Zealand Trends in Infrastructure.
The latest report, prepared by the New Zealand Institute of Economic Research (NZIER), finds that civil construction costs increased by 2.7% in the June 2026 quarter, taking annual cost growth to 5.2%.
This compares with annual growth of 2.8% for residential construction and 2.2% for non-residential construction.
Civil construction cost inflation is forecast to rise further, reaching approximately 5.8% in the September quarter and 6.0% in the December quarter, before easing through 2027 as the impact of the 2026 fuel price shock unwinds.
RLB Director Ed Cook says the figures highlight the increasingly important distinction between infrastructure and the broader construction market.
“New Zealand’s infrastructure sector is entering a period where a substantial forward pipeline is increasingly translating into funded, procured and active projects. At the same time, the sector is dealing with a very different cost environment from the construction boom of 2021 and 2022,” Ed says.
“The immediate pressure is being driven less by widespread capacity constraints and more by energy, fuel, freight and other imported inputs. However, as the infrastructure pipeline continues to build, competition for specialist skills, plant and other civil construction resources will become increasingly important.”
Infrastructure investment provides an important buffer
The outlook for infrastructure remains considerably more positive than for general building activity.
Budget 2026 included around $7 billion in additional capital investment across transport, health, education, housing and other infrastructure.
The Government has also broadly endorsed the recommendations of the National Infrastructure Plan, including measures intended to improve long-term investment planning, funding, procurement, project assurance and delivery.
The infrastructure pipeline is also continuing to strengthen. Te Waihanga, the New Zealand Infrastructure Commission, reported that the total value of infrastructure initiatives increased by $15.6 billion between March and June to around $290 billion.
Fully funded initiatives increased by $4.5 billion to $95.8 billion, while initiatives with committed funding or a confirmed funding source increased by $3.1 billion to $192.8 billion.
Projects already under construction remained at around $71.2 billion in June, while 519 initiatives worth a combined $12.7 billion were progressing through procurement.
“The move from a very large prospective pipeline towards funded, procured and construction-ready projects is significant,” Ed says.
“Greater certainty around project timing allows clients, contractors and the wider supply chain to plan more effectively for labour, equipment and capability. That predictability will be increasingly important as New Zealand moves into a period of sustained infrastructure investment.”
Transport leads infrastructure spending
Transport continues to account for the largest share of projected infrastructure spending.
Several major projects are already under construction, including Ōtaki to north of Levin, the Hawke’s Bay Expressway, Takitimu North Link Stage 1 and SH29 Tauriko West – Ōmanawa Bridge.
The first stage of the Northland Expressway is in the final stages of procurement, while procurement for Cambridge to Piarere is underway. NZ Transport Agency expects six Roads of National Significance to be under construction by early 2027.
Transport is expected to account for around $9.6 billion, or 46%, of projected infrastructure spending over the next 12 months. Water infrastructure is expected to account for a further $4.7 billion, or 22%.
Projected annual transport infrastructure spending is also expected to remain above $5 billion through to 2033.
Fuel shock flows through construction costs
The sharp increase in global oil prices earlier in 2026 has been a major driver of the acceleration in civil construction costs.
Restrictions on shipping through the Strait of Hormuz contributed to a significant rise in international oil and petrochemical prices, with petrol and diesel prices in New Zealand rising sharply in March and April.
While global oil prices subsequently eased following progress towards restoring shipping through the Strait of Hormuz, the impact on construction costs is expected to persist as increases flow through supply chains and contracts with a lag.
Civil construction is particularly exposed because diesel powers heavy construction equipment and transport vehicles, while bitumen and other petroleum-based products are key infrastructure inputs.
Volatility in bitumen prices has been particularly pronounced in 2026, with implications for road construction and maintenance projects.
RLB expects direct fuel-related pressure on construction costs to ease over coming quarters, although geopolitical uncertainty and the potential for renewed disruption to global oil supply remain key upside risks.
Cost inflation expected to moderate from 2027
Despite the near-term acceleration, RLB forecasts civil construction cost inflation will gradually ease during 2027.
Annual civil construction cost inflation is forecast to fall from around 6.0% at the end of 2026 to approximately 1.8% in the second half of 2027.
“This moderation reflects the expected unwinding of the temporary fuel price shock, although underlying increases in labour and other construction costs, combined with resilient infrastructure demand, are expected to provide some offset,” Ed says.
“Beyond 2027, we expect civil construction cost inflation to gradually strengthen as infrastructure activity increases and spare capacity in the construction sector is absorbed.
“As more projects move through procurement and into construction, competition for specialist labour, plant and other civil construction resources is expected to increase.”
RLB’s Third Quarter 2026 Infrastructure Forecast – New Zealand Trends in Infrastructure provides analysis of construction cost movements, infrastructure investment and the outlook for New Zealand’s civil construction sector.
Explore the Interactive Report or download the full PDF version.
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