Labour Shortages and Supply Chain Issues Elevate Insurance Claims Costs

Cities such as Brisbane and Perth are experiencing significant cost escalations, driven by strong demand, logistical challenges, and a persistent shortage of skilled labour. Contractors are incorporating higher risk margins into their bids, reflecting concerns about productivity and market uncertainty.

Material costs remain volatile. For the first time in over a decade, house construction material prices have shown a quarterly decrease, mainly due to lower timber and steel prices in New South Wales and Victoria. However, concrete costs have surged, now 30% higher than at the end of 2021. Other materials, such as ceramics, finishes, and roofing, have also recorded cumulative increases of 20% to 30% over the past three years.

The construction sector reports a national gap of 90,000 skilled tradespeople, with wage growth expected to reach 6% in 2025. Projections indicate that more than half a million new workers will be needed over the next five years to support national infrastructure and housing targets. This labour shortage is leading to project delays, higher costs, and increased claims inflation.

Additionally, over 3,200 construction firms entered administration in 2024, a significant increase from the previous year. Factors such as fixed-price contracts, cash flow challenges, and ongoing inflationary pressures contribute to project delays and incomplete work, driving up insurance claims and complicating the recovery process.

For tradespeople and small business owners, these developments underscore the importance of proactive risk management and comprehensive insurance coverage. Collaborating with insurance brokers to tailor policies that address specific risks can help mitigate the impact of rising costs and ensure business continuity amid industry challenges.