Building costs remain high despite easing inflation

26 August 2026

Today’s ABS inflation data showed headline inflation eased to 3.5 per cent during July. However, new dwelling costs rose by 5.7 per cent over the past year, while rental inflation remained elevated at 3.6 per cent.

Master Builders Australia Chief Economist Shane Garrett said building businesses continue to face pressure from rising costs and ill-considered policy decisions, making the latest dwelling and rental inflation figures unsurprising.

“The ABS’s observation that higher labour and material costs are being passed on to consumers should serve as a reminder to government that when pressure is placed on builders and tradies, all Australians ultimately pay the price.

“The rental inflation result is also no surprise, particularly given independent modelling shows that following the federal budget’s tax changes the national rent bill could increase by $3.42 billion over the next four years, making it even harder for renters to save for a deposit,” said Mr Garrett.

Master Builders Australia CEO Denita Wawn said recent policy decisions affecting investment are contributing to many new building projects no longer stacking up financially.

“The uncertainty created by global economic disruption and recent Federal Budget measures is hurting housing supply, pushing up rents, and undermining apprenticeships and productivity across the construction sector.

“The cost of building a home is now more than 50 per cent higher than it was before the pandemic, at a time when housing remains one of the biggest contributors to inflation and one of the top concerns for voters.

“A combination of rising costs for new dwellings, alongside market uncertainty, means that project decisions will be delayed and new housing supply will slow.

“As we have consistently argued, the Government should reconsider its proposed changes to capital gains tax, negative gearing, and the ban on self-managed super fund investment in housing. At a minimum, it should grandfather the proposed tax changes to trusts including those used by small business builders. These would be important steps towards restoring a pro-housing supply, infrastructure and construction agenda ahead of MYEFO,” said Ms Wawn.

Media contact: Dylan Hafey, Adviser, Media & Government Relations

0497 330 064 | dylan.hafey@masterbuilders.com.au