A week that sums up the year
In the space of two days this week, the Reserve Bank lifted the cash rate to 4.85 per cent, its highest level since 2008, and American voters handed both houses of Congress to the Democrats. Neither event changes what Australia needs to build, but they change the conditions it will be built under.
For anyone delivering major projects in defence, mining or infrastructure, 2026 has been a year of stacked pressure. The war in the Middle East pushed diesel to record prices. Rates have gone up five times. Construction costs looked like they were settling early in the year, then started climbing again. And the three sectors that matter most to Western Australia are leaning on the same contractors, the same supply chains and, above all, the same people.
This piece looks at what has changed, what probably hasn't, and where the real constraint sits. Our view is simple. The binding limit is less about money than about the group of leaders who can hold a large project together when the inputs won't sit still.
Costs: the easing that didn't last
Early this year the industry had some reason to think the worst of the cost cycle was behind it. Cotality's Cordell index rose just 0.2 per cent in the March quarter. That turned out to be a blip. Costs rose 1.0 per cent nationally in the September quarter and 3.2 per cent over the year, and Western Australia led the states at 1.1 per cent for the quarter. Cotality's own estimating lead described the early softness as an anomaly (Cotality via InfrastructureNews).
The Middle East conflict was responsible for much of that damage. Rider Levett Bucknall estimates it added 1.5 to 3.5 per cent to overall project costs, with civil, infrastructure and freight-heavy work most exposed. Supplier estimates for February to June put diesel and plastic pipe up 25 to 40 per cent, bitumen and asphalt up 20 to 40 per cent, and reinforcing and structural steel up 4 to 10 per cent. Contractors responded as you'd expect. They shortened price validity, bought early and pushed harder for shared risk on volatile inputs (RLB, Q2 2026).
Two assumptions behind the mid-year forecasts now look shaky. RLB's tender price forecasts assumed the conflict would be mostly resolved by the September quarter. This week the RBA said it remains unresolved, and that inflation won't fall below 3 per cent until late 2027, around three quarters later than it previously forecast (ABC News). Back in March, RLB pointed to Reserve Bank research suggesting a 4.35 per cent cash rate could take about $42 billion off construction work done between 2026-27 and 2029-30 (The Urban Developer). The cash rate is now 4.85 per cent.
Higher rates don't land evenly, though. They bite hardest on housing and private development. Publicly funded infrastructure, defence works and resources projects tied to long-term demand hold up better. For Western Australia that cuts both ways. The pipeline stays firm, and so does the competition for the firms and people who deliver it. RLB has Perth tender prices rising 5.6 per cent in both 2026 and 2027, in a market it describes as running near capacity with limited Tier 1 competition.
Defence and minerals are becoming one conversation
A few years ago, defence and mining sat in separate boxes. That's no longer true, and Western Australia is where the overlap is most apparent.
On the defence side, the Commonwealth and WA governments confirmed the site of the Henderson Defence Precinct in August. It will host construction of the Navy's future general purpose frigates and Army's landing craft, along with sustainment for nuclear-powered submarines under AUKUS. The initial funding commitment is $12 billion, the program has moved into concept design, and governments expect around 10,000 direct jobs over two decades. The Premier wants defence to be the state's second-largest industry within ten years (Defence ministers' release). The first three upgraded Mogami frigates are being built in Japan, with the lead ship due in 2029. The other eight are planned for Henderson from the early 2030s, once the precinct is consolidated (Asian Military Review). There is more defence work in Pilbara.
On the minerals side, the US-Australia critical minerals framework turned one in October. The two governments have now announced more than A$5 billion in support for Australian projects. Alcoa broke ground in August on a gallium recovery plant at Wagerup, designed to supply roughly 10 per cent of the world's gallium, with Pentagon equity behind it. Arafura started building its Nolans rare earths project in the Northern Territory in October. Tronox's rare earths refinery and Ardea's Kalgoorlie nickel project, both in WA, hold letters of support from export credit agencies (Metal Tech News). These are mining and processing projects. The reason they're being funded is security.
So what does a Democratic Congress change? Less than the headlines suggest, but not nothing.
AUKUS. A change of majority doesn't end AUKUS. It may bring closer scrutiny of cost, timelines and purpose, and that can affect how quickly parts get funded. The things to watch are appropriations, technology transfer and delivery milestones (Perth USAsia Centre).
Critical minerals. Building supply chains outside China has support in both parties. What changes is oversight. Democrats have flagged hearings and subpoenas over the administration's equity stakes and minerals deals, and analysts warn that investigation risk could slow some investment in US-backed companies (The Oregon Group).
Tariffs. Most tariff power sits with the President under existing law. Congress can scrutinise and push for exemptions, but a quick reversal is unlikely.
The direction still continues, unchanged. The terms get more scrutiny. For Australian owners and contractors, that argues for planning around continuity while expecting more questions, more paperwork and some slippage on anything that depends on a US funding decision.
Supply chains: the weak points are at home too
The oil shock showed how exposed Australian projects are to events a long way off. Diesel prices doubled soon after the conflict began before easing from their April peak (RLB, Q2 2026). But some of the tightest constraints are home-grown.
Take steel. Infrastructure Australia estimates the national construction pipeline needs about 26.6 million tonnes of structural steel over five years, against domestic fabrication capacity of roughly 1.4 million tonnes a year. Imports fill the gap, often well below local prices, and an industry survey found 80 per cent of local fabricators operating below break-even capacity. Fabrication also underpins naval shipbuilding, armoured vehicles and mining equipment. A thinning local base is a cost problem for infrastructure and a sovereignty problem for defence.
Then there's the contractor base. Subcontractors deliver about 41 per cent of infrastructure construction, which Infrastructure Australia links to interface risk and weaker Tier 1 self-performance. Construction still accounts for about a quarter of company insolvencies, with around 3,400 to 3,500 firms entering external administration in 2025-26 depending on how the ASIC data is cut (Insurance Business). In a tight market, every failure removes capacity that is slow to rebuild.
And then there are people. Infrastructure Australia's most recent capacity report put the infrastructure workforce about 141,000 workers short in October 2025, with the gap forecast to pass 300,000 by mid-2027 and regional shortages to roughly quadruple. Two lines in that report deserve more attention than they get. Engineers, architects and scientists are forecast to be 126,000 short at a late-2026 peak. Project management professionals, the people who actually run delivery, are forecast to be about 59,000 short in mid-2027. Firms also told the agency that states are competing for workers on large resources and construction projects, which pushes costs up further (Infrastructure Australia).
The real bottleneck is delivery leadership
Money can be found. Steel can be imported. Prices can be renegotiated. What's much harder to source is the person who can run a multi-year, multi-billion-dollar program while the ground keeps shifting under it.
That 59,000 figure covers project management professionals broadly, not only senior leaders. In our experience, the pressure is sharpest at the top, where the right experience often takes 15 years or more to build and can't be fast-tracked. And in Western Australia, the three sectors are now chasing the same profile. Much of WA's bench of experienced project directors was built on two decades of resources construction. Those same people are now wanted for the Henderson precinct, for critical minerals processing plants, and for state programs like Westport, which Infrastructure WA is already working to schedule alongside Defence's plans on the Western Trade Coast.
The job itself has also changed. When input prices are stable, a project director mostly executes a plan. This year, the plan was a field target that kept moving. Price validity shortened, risk-sharing clauses came back to the table, and some funding now depends on decisions in Washington as well as Canberra. The skills that matter most have shifted toward commercial judgment, contract and risk allocation, stakeholder management across government and industry, and the nerve to make good calls with incomplete information. Technical depth still counts, but it just isn't enough on its own.
A few practical points follow for owners and contractors.
Treat critical roles like long-lead items. Identify the leadership positions that will make or break each program and start planning for them 12 to 18 months before they bite. That includes succession for key people on programs that run longer than most tenures.
Cross over between sectors, but test what actually transfers. Resources leaders bring scale, remote logistics and a hard-edged safety culture. Defence leaders bring program discipline and comfort with compliance. Infrastructure leaders bring public stakeholder and contract management. Some things don't move easily. Security clearances take time. Owner and contractor mindsets differ. Commercial models like cost-reimbursable and lump sum reward very different instincts.
Weight commercial and risk judgment more heavily when you hire. In a volatile market, the cost of a poor commercial call can outrun the cost of a technical one.
Assume your best people are being approached. Competing programs will hire from each other. Losing a project director mid-delivery usually costs far more than keeping one.
Don't over-read the US result. Plan around Australian fundamentals, keep an eye on Congressional oversight of anything US-funded, and avoid redesigning strategy around a news cycle.
Closing thoughts
None of this is cause for gloom. Western Australia's forward pipeline across defence, resources and infrastructure is deep, and the strategic case behind much of it firmed up this year rather than fading.
But a deep pipeline isn't the same as delivery. Costs are rising again, rates are at an 18-year high, and USA is about to get noisier. The organisations that come through this well will be the ones that secured the right leaders early and gave them room to make hard commercial calls.
If you're working through any of this on your own programs, we're always happy to compare notes.