Australia’s construction surge - what’s driving It and how It compares globally

Australia’s construction sector is showing solid momentum. According to recent data from the Australian Bureau of Statistics, about 33,900 workers were added to construction payrolls in the three months to August, taking the total employed in the industry from roughly 1.319 million in May to around 1.353 million in August. This builds on longer-term growth, showing that over the 2023-24 financial year, employment in Australia’s construction industry rose steadily to about 1.29 million workers, writes John Ridgeway.

This growth is not just a reflection of the number of increased residential projects. Statistics show that non-residential work, infrastructure spending, renewable energy projects and government-backed investments are also increasingly contributing. Indeed, the construction sector’s contribution to GDP has been rising, with one report estimating over A$360 billion in value, accounting for roughly 9% of Australia’s GDP.

Where Australia stands

The key characteristics of Australia’s current construction employment picture include strong job growth. Even though job vacancies have softened in some quarters there's been a persistent demand for workers.

However, labour shortages in skilled trades and apprenticeships, especially in residential construction and infrastructure projects continue. Falling productivity, particularly in house building also shows that the sector is producing around half as many homes per hour worked than it did 30 years ago.

That said, growth expectations over the next few years look promising, with some forecasts showing Australia’s construction sector growing by more than 5.5% in employment terms.

How Australia compares with other developed countries

To understand Australia’s performance, it helps, if we compare it with other developed nations. In many developed countries, construction employment has been under pressure. For example, some European countries are seeing declines or flat growth due to higher costs, regulatory burdens, or labour shortages. According to global employment datasets, the UK and Japan have experienced slight declines in construction employment in recent years.

In Germany, by contrast, construction employment is more stable and has seen modest growth. The mix between public infrastructure and housing demand has helped to buffer some of the sector’s volatility.

In Canada, the United States and parts of Western Europe, there’s also strong investment in infrastructure (transport, energy, health) and non-residential construction, but these are balanced by labour shortages, regulatory complexity and increasing materials costs. These pressures are familiar in Australia too.

So, while Australia’s job growth in construction compares favourably with many of its development peers, it is not alone in facing constraints around labour, productivity and regulatory/frictional bottlenecks.

What’s driving Australia’s relative strength

It is worth noting that there are several factors which are helping Australia maintain its momentum in construction employment. Infrastructure investment at both federal and state levels has been increased. Projects include transportation, hospital, school and renewable energy projects.

Housing demand remains strong with population growth, urban migration and housing affordability pressures, driving residential building projects. Policy focus on modernisation and growth in non-residential sectors, including health, education and commercial developments, pushing demand for new build, is another factor.

The challenges and the trade-offs

Despite the strong numbers, Australia’s construction sector is under pressure in ways that mirror global trends. Labour shortages and skills gaps, especially for trades, apprentices and regional workers remain. Increasing numbers of workers are still needed to keep pace with demand.

Declining productivity, especially in residential house building is resulting in less output per hour worked, reducing efficiency, raising costs and slowing down project delivery. Rising input costs and supply chain pressures, including materials, labour and regulatory compliance costs are also dampening real net growth and squeezing margins.

Lessons from around the world

Looking globally, there are lessons that Australia might use to address these pressures. Germany and Canada highlight how stable regulatory environments and strong vocational training programmes help smooth out labour shortages. Scandinavian countries often get better productivity by using offsite and modular construction methods, innovative planning and technology integration.

UK and Europe increasingly mandate digital documentation (e.g., golden thread in the UK) and sustainability regulations which force the sector to upgrade processes.

If Australia can adapt similar strategies such as more investment in training, prefabrication/modular methods, digital tools and more efficient regulatory processes, it has the opportunity to convert its strong employment growth into sustained long-term sector resilience.

What It means going forward

For businesses, policymakers, and construction professionals in Australia, here’s what to watch. It needs to ensure that skills pipelines grow, especially apprenticeships and trade training. Without this, labour shortages will worsen.

Improving productivity through technology adoption, offsite construction, better project management and streamlined permitting and regulatory approvals, is also needed. Maintaining the balance between residential demand and infrastructure investment is another key factor.

That said, Australia’s construction sector is experiencing meaningful growth in employment, driven by strong demand across residential, non-residential and infrastructure projects. Compared with many developed countries, Australia is performing reasonably well in terms of job growth, though it shares common challenges such as labour shortages, rising costs, and decreasing productivity.

The opportunity now is to turn this growth into sustainable strength by investing in workforce training, more efficient building methods, regulatory reform and technology adoption. If Australia manages to do so, it won’t just catch up with global best practice - it has the potential to lead.