According to Rider Levett Bucknall’s (RLB) Second Quarter 2026 Infrastructure Forecast report – New Zealand Trends in Infrastructure – the $274 billion infrastructure pipeline and resilient civil construction demand continue to support activity, while civil construction inflation is expected to rise further in 2026 before easing.
Prepared by the New Zealand Institute of Economic Research (NZIER), the report highlights a resilient infrastructure construction outlook in New Zealand, despite persistent softness in private sector building activity and intensifying cost pressures driven by global energy shocks.
RLB Director Mr. Ed Cook commented, “RLB sees infrastructure activity continuing to outperform other sectors of the construction sector, supported by a large and increasingly funded national pipeline.”
“While civil construction cost inflation rises further on the back of fuel price volatility, spare capacity remains in parts of the broader construction sector, although constraints are emerging in delivery markets,” he said.
Infrastructure demand remains resilient despite broader construction slowdown
RLB’s Infrastructure Forecast found that infrastructure construction continues to be the key stabilising force in New Zealand’s construction sector, offsetting weaker private sector building activity.
While residential and non-residential construction remain subdued due to weak demand conditions and tighter margins, infrastructure work is being underpinned by long-term public investment programs and a strong forward pipeline of transport, water, and energy projects.
The infrastructure pipeline snapshot shows a large proportion of work is already moving beyond planning into procurement and delivery stages, signalling sustained activity over the medium term.
Cost pressures intensify amid global fuel shock
Mr. Cook continued, “Like many, we are seeing the impact of global fuel prices, triggered by geopolitical tensions in the Middle East and disruptions to oil supply routes. This has increased cost pressures across civil construction, particularly in transport-intensive infrastructure projects.”
“Fuel costs directly influence construction inputs such as diesel for machinery and transport logistics, bitumen, resins and asphalt production and freight and materials movement across supply chains. “
Despite these near-term inflationary pressures, the report’s outlook assumes that oil price shocks will gradually unwind from mid-2026, allowing cost growth to moderate over time. The outcome of the US-Iran hostilities will be critical to resolving market volatility.
Labour constraints and capacity pressures emerging
Although the broader construction sector still has spare capacity, RLB’s Infrastructure Forecast report identifies emerging pockets of labour shortages – particularly in skilled trades and specialist civil engineering roles.
At the same time, firms are reporting increased difficulty sourcing skilled labour, mixed availability of unskilled labour, rising wage pressures in certain segments and lower appetite for investment due to uncertainty.
These dynamics are adding to delivery risk and upward pressure on costs, particularly in large-scale infrastructure projects requiring specialised expertise.
Pipeline strength underpins medium-term outlook
Despite short-term volatility, the medium-term outlook for infrastructure construction is positive.
The NZ infrastructure pipeline – valued at approximately $274 billion – continues to expand across multiple sectors, with transport infrastructure representing the largest share of investment. Water and energy projects also form a significant and growing portion of future work.
A growing share of the pipeline has identified funding, with the value of fully funded initiatives increasing over the quarter, suggesting improved visibility for contractors, consultants, and investors over the coming years.
However, there are ongoing risks around funding affordability constraints; project prioritisation and sequencing, consenting and regulatory delays and delivery capability across the sector.
These issues are identified as key determinants of whether the pipeline can be converted into completed infrastructure.
Civil construction cost inflation forecast to peak before easing
Mr. Cook concluded, “According to RLB, the 1.9 percent increase in civil construction costs in the March 2026 quarter resulted in annual civil construction cost inflation rising to 3.1 percent from the same quarter last year.”
“The elevated level of civil construction cost inflation reflects the resilience in the pipeline of infrastructure construction work, in contrast to other types of construction.”
“We expect the recent surge in fuel prices to drive up construction cost inflation over the coming year, given the sector’s exposure to transport costs. Consensus forecasts are for the increase in crude oil prices to be short-lived, with prices forecast to ease from mid-2026,” he said.
Our CGPI-Civil Index forecasting model captures forecasts for various key inputs including crude oil, which drives our forecasts for civil construction cost inflation to ease later in 2026.
RLB forecasts that annual civil construction cost inflation will peak at around 5 percent towards the end of this year. Beyond that, the firm expects it to ease to around 1.6 percent in late 2027 before recovering to around 2.7 percent over the longer term.
For further comments, please contact:
Ed Cook
Director
Rider Levett Bucknall
Phone: +64 9 309 1074
Mobile: +64 21 246 6484
Email: ed.cook@nz.rlb.com
NZIER. 2026. New Zealand trends in infrastructure construction.
Infrastructure demand holds up as civil construction costs rise amid fuel shock and geopolitical uncertainty
Opinion | From access routes to belonging: designing buildings that work for everyone
Climate reality check to take centre stage at The Property Conference 2026
Earthquake-prone buildings: Select Committee report due this month
Property Council members recognised in King’s Birthday Honours
