ACIF Forecasts: Shocks and uncertainty reduce growth outlook

11 June 2026

[AMCA MEMBERS ONLY] Get complimentary access to ACIF's forecasts, which predict a reduced growth outcome for building and construction in 2026.

"The surge in fuel prices, higher inflation and now higher interest rates will place a heavy toll on the building and construction industry."

The May 2026 update of the ACIF Forecasts projects that growth in the industry could be brought to a standstill. This is in sharp contrast to the 3.6 per cent growth seen over 2025. The building and construction industries now must endure a reversal of policy settings that could send performance backwards. This could lead to a contraction in work done of 0.8 per cent in 2026. 

The slowdown expected in 2026 is being driven by forces outside of Australia’s control. While there is much uncertainty about the future turn of events, particularly in the middle east and in global markets, one thing is clear: the RBA is determined to defeat the entrenchment of inflationary expectations, and it has begun a series of interest rate hikes to combat this risk. 

The market response to higher interest rates is likely to be felt most keenly in Residential Building. The ACIF Construction Forecasting Council expects that the change will knock down growth in the value of work done from 6 per cent in 2026 to just 0.5 per cent in 2026. Most of the pain will be felt in building of new houses and in alterations and additions. The track record is very clear, change Australian households spending power and you will see lower spending in these categories in short order.

>> [AMCA members only] Download the Australian Construction Market Report - May 2026 <<

The May 2026 forecasts also foreshadow adversity in Non-Residential Building. While there is some sustained strength in categories such as Other Commercial reflecting the ramp up in investment in large scale data centres around the country, this will be overwhelmed by weakness in Offices, Industrial and Retail and Wholesale Trade. Activity in these areas will be dampened with higher interest rates. The net result is expected to be a 1.6 per cent fall from $66 billion to $65 billion in 2026.

Growth in infrastructure construction will bring some relief to the building and construction industries in 2026. This is largely attributable to growth in Electricity and Pipelines, supporting the transition to more sustainable energy supply. A key problem in 2026 is that growth in Infrastructure is not sufficient to fully offset weakness expected to prevail elsewhere.

There are many uncertainties in these forecasts. The possibility of a prolonged conflict in Iran weighs heavily on the outlook for the building and construction industry, as it does for the economy at large. The forecasts reflect the knowledge that this industry is particularly exposed to the impact of changes in interest rates. This impacts on demand and on costs, compressing margins and placing more stress on an industry that already tops the industry count for insolvencies.

It is also very difficult to assess the full impact of recent policy changes. Fiscal support to compensate households and business for cost increases by federal and state governments, comes at the risk of adding to aggregate demand and sustaining inflation. Withdrawal of budget “tax expenditures”, such as negative gearing provisions in personal income taxation, may discourage investment in residential building, but it may also redirect investment into other asset classes, including commercial property, property trusts and managed funds.  

The increase in uncertainty is possibly the gravest threat. It is very difficult for buyers and sellers to anticipate all the myriad fundamentals that are shifting in the winds of change right now. It is hard to anticipate how this plays out, but higher costs and higher risk generally result in less investment and growth.

Free access for AMCA members

AMCA members receive complimentary access to ACIF's Member Forecasts Program, which has two components:

  • Australian Construction Market Report - May 2026 (retails for $440 per subscriber)

  • ACIF Customised Forecasts Dashboard (retails for $350+GST per subscriber)


Access to these products is a benefit of AMCA membership – please do not share them outside your companies.

>> [AMCA members only] Download the Australian Construction Market Report - May 2026 <<

>> [AMCA members only] Access the ACIF Customised Forecasts Dashboard <<

If you have any issues accessing the dashboard, the dashboard data can be obtained in spreadsheet format by emailing [email protected]. 

To access the dashboard:

Learn more at https://www.acif.com.au/forecasts/forecasts.