Expanding construction capacity is becoming more important for Australia's broader economy as more of it competes for the same construction workers, contractors, and project-management capacity, ANZ Research said in a note on Thursday.
The real value of the total construction pipeline is estimated by the Australian Bureau of Statistics to have reached a record AU$172 billion, as of the first quarter. The total construction pipeline is now equivalent to around 25% of real gross domestic product.
The pipeline reflects growing demand from housing, infrastructure, data centers, and the energy transition. Population growth is supporting housing demand, investment in data centers has accelerated sharply, and renewable energy and transmission projects are increasing.
The drivers of non-residential construction have changed, with the recent increase reflecting expanding investment in the "commercial buildings not elsewhere classified" category, which includes data centers, and, to a lesser extent, education, warehousing, short-term accommodation, and retail/wholesale buildings.
In a capacity-constrained environment, labor and contractors are likely to flow towards projects that can absorb higher costs or place greater premium on timely delivery. Construction-related inflation may therefore remain a source of price pressure.
Data-center projects are well placed in particular to compete for scarce labor and specialized construction resources.