2025 Construction Outlook: Challenges, Optimism, and the Road Ahead

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2024 was a tough year for everyone involved in the construction industry.  Higher interest rates, construction costs and general uncertainty by developers and end users conspired to drive activity lower.  This resulted in many professions across the industry downsizing via redundancies or natural attrition.  What does 2025 look like?  Is there some silver starting to appear around those clouds?

Economic Overview

As of January 2025, the Australian economy is experiencing sluggish growth. While a recession is not anticipated, and it appears that we may have passed the worst of it,  the impact of elevated interest rates still casts a shadow across the economy.  With core inflation gradually decreasing from previously high levels, there appears to be consensus from economists that the next interest rate move is down.  With some predicting up to 5 decreases in 2025, and potentially as soon as February.  Any downward move will have a positive impact on both activity, and sentiment, particularly the housing market (single and multi-res).

Construction Industry Overview

The construction industry is a significant sector in the economy, making up roughly 11% (including its related sectors).  A recent report from Technavio on the Australian Construction market over the next 4 years, has predicted that the construction industry in Australia is projected to grow by over $67 Billion between 2025 and 2029 – from a current value of approximately $500 Billion.  From this we can assume increases in both residential and non-residential construction.

Government Spending

There is some cause for cautious optimism in this space.  2025 will see a Federal Election, and 2026 will see a State Election (assuming no early calls), and as such we should start to see increases in spending by the incumbents (and increases in promises from both sides of politics).

Conclusion

Australia’s economic conditions as of January 2025 present a complex picture. While certain sectors within the construction industry demonstrate resilience, others face significant challenges. The interplay of public sector investment, inflationary pressures, and sector-specific dynamics will continue to shape the construction landscape in the coming months.


By: Leigh Monro, Associate Director, Architecture & Design

Leigh Monro joined the Planned Resources team as our Design Recruitment Consultant and is also the Associate Director.

Leigh Monro – Associate Director, Architecture & Design

Connect with Leigh Monro on Linkedin

Contact: +61 451 674 977 leigh.monro@plannedresources.com.au

 

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