Australia & New Zealand combined will see 1.4% to 2.1% GDP growth in the 2nd Q of 2026
The Australian and New Zealand construction industries were experiencing a decent growth spurt in January and February, prior to the start of the Iran conflict. Higher inflation and increased ocean freight will increase construction costs and slow growth prospects for the next 2 or 3 quarters.
Some decent news for a change, the Australian construction sector is seeing a good number of new Data centers / AI facilities breaking ground around the country, expansion of Data Centre Capacity. The Australian home building construction sector is set to contract by 3% to 4% as we move further into 2026. The recent terrorist attack on Bondi Beach is a major issue the Government needs to deal with.
The Australian construction sector will see some moderate growth in 2026, propelled by infrastructure, mining, pipelines, oil & gas, AI related data centers, commercial & new housing related capital projects. Australia & New Zealand construction challenges include: a shortage of skilled labor, high ocean freight costs, increased costs of both labor and materials, a spike in inflation, and the future actions of its reasonably close neighbor China.
Increased labor and material costs continue to be a problem, a number of mid-sized construction companies have gone out of business in the last 6 - 12 months, which is problematic. However, the construction industry appears to have turned the corner, a more positive attitude as we move into 2026.
Australia’s construction market is estimated to be in the $190 to $210 billion range by the end of 2026.
New Zealand, Australia’s close neighbor will see a similar situation driven by Government funded infrastructure expenditures on roads and bridges, electrical distribution upgrades, lower interest / borrowing rates, additional housing units related an increase in New Zealand’s population growth.
The unusual recent naval operation of (3) Chinese warship sailing in & around the Tasman Sea has set off alarm bells in both Australia & New Zealand & will result in increased military spending in both countries.
The size of the New Zealand construction market was estimated to be in the $55 to $65 billion in 2025, construction activity is expected to remain similar to 2026 levels.
The number 1 issue for the Australian and New Zealand construction sectors is: How long will the Iran conflict last and will it drive up shipping and imported construction material costs and inflation in the next 3 to 6 months?
