Eslake Report confirms Civil Construction hardest hit by Fuel Shock

Civil Contractors Federation Victoria has today pointed to a major new economic report by leading economist Saul Eslake, confirming that Australia’s civil construction sector is the most exposed to the current global fuel shock and faces significant risks to project delivery and business viability, including in Victoria.

The report, The Impact of the Middle East Fuel Crisis on Australia’s Civil Construction Sector, provides the most comprehensive assessment to date of how escalating fuel prices are impacting the Australian economy, with a particular focus on civil construction as the nation’s most diesel-dependent sector.

CCF Victoria Executive Director Annie Kessell said the report should serve as a warning to governments and project owners across the state.

“This is a rigorous, independent assessment from one of Australia’s most respected economists, and its findings are clear. Civil construction is the most diesel-exposed sector in the Australian economy and is being hit hardest by this fuel shock,” Ms Kessell said.

“Diesel underpins every aspect of civil construction. When prices spike at this scale, the impacts are immediate, systemic and unavoidable.”

The report finds that rapid increases in diesel and petroleum-based input costs are colliding with a contracting environment where between 80 and 95 per cent of projects are fixed price, leaving contractors unable to recover sudden cost increases.

“In Victoria, that creates real risks for contractors already delivering the roads, subdivisions, utilities and enabling infrastructure communities rely on,” Ms Kessell said.

“This report makes clear that the risk is not theoretical. It is being felt across projects right now.
“Margins in civil construction are already tight. Sustained increases of this magnitude will place significant pressure on business viability and increase the risk of insolvencies across the sector.”

CCF Victoria warned that the consequences will extend well beyond the industry, with flow-on impacts for the delivery of housing, energy and transport infrastructure.

“Civil construction is the delivery arm of Australia’s infrastructure pipeline,” Ms Kessell said.

“If this sector is destabilised, it directly affects the ability of governments to deliver housing, achieve energy transition targets and maintain critical infrastructure investment.”

The report calls for a coordinated national response, including mechanisms to address abnormal input cost increases in existing contracts and targeted support for projects where costs cannot be absorbed.

CCF Victoria said there is a strong case for the Commonwealth, states and territories to work together on practical responses that protect delivery capacity and keep projects moving.

“This report provides a clear, evidence-based foundation for action,” Ms Kessell said.

“We are calling for a practical response that recognises the importance of civil construction to Victoria and to the national economy.”

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