Construction is the fourth-largest industry in NSW, employing approximately 9.1 per cent of the state’s workforce and contributing around 7.6 per cent to gross state product, according to the Australian Bureau of Statistics. However, despite its critical role in the economy, the construction sector has experienced a sustained decline in productivity and growth over several decades.

The Building and Construction Industry Quarterly Data Report indicates that the industry’s growth rate continued to slow in 2024, underscoring persistent structural challenges for Australia – challenges that mirror trends observed in many other countries. Nevertheless, there is a significant opportunity to reverse this trajectory by accelerating the digitalisation of the construction sector, driving innovation, enhancing efficiency and supporting sustainable long-term growth.

Digitalisation enhances accuracy, improves quality and efficiency, and enables more effective management of complex projects. As one of the least digitalised sectors, construction needs to urgently address the challenges of low productivity and operational inefficiency by embracing digital transformation, which in turn helps foster a more resilient economy. According to the StartupAUS report on the digital transformation of Australia’s construction sector, digitalisation could add up to $25 billion in annual value to the industry over the next decade.

A 2021 report by the Centre for International Economics identified the lack of digitalisation as a significant weakness in the construction sector. A further report by Western Sydney University researchers for the NSW Building Commissioner also revealed that more than half of NSW’s Class 2 construction enterprises exhibit a very basic level of digital maturity, with research and development (R&D) spending less than 1 per cent of revenue. According to a report commissioned by Autodesk last year, mid-ranging construction businesses in Australia employ an average of just five technologies, increasing to six in larger enterprises. However, despite low levels of adoption, most companies have few plans for further technological advancements compared to other countries.

A strong case for greater digitalisation in the construction sector

Digitalisation can transform traditional analogue approaches, pushing the industry towards digital technologies and shifting operations to automated processes. Digital tools benefit the industry in various ways. For instance, building information modelling (BIM) creates detailed 3D models that enhance stakeholder collaboration, leading to more accurate designs and reduced rework. Blockchain can improve the transparency and security of construction contracts, reducing fraud and ensuring immutable records. While AI and machine learning facilitate smarter construction, the internet of things and digital twins can assist in real-time monitoring of construction sites and built assets. Similarly, robots and exoskeletons would reduce labour costs, improve precision and productivity.

The 2024 Autodesk report on digital adoption in the construction sector showed that technology integration improved operational efficiency by 40 per cent. A study in the United States has also highlighted how digital technologies can significantly reduce project risks, costs and duration. Collectively, digital technologies can drive innovation and provide solutions to long-standing challenges in the construction industry, such as low productivity, inefficiency, high costs and safety concerns. Ultimately, this will lead to smarter, safer and more sustainable construction practices.

Ongoing barriers to digitalisation

Despite the recognised benefits of digitalisation, progress has been slow and patchy. The Autodesk report highlighted promising growth in adopting technologies such as AI, data analytics and cloud-based software. However, the construction sector continues to face barriers to progress. These include high implementation costs and ongoing expenses for maintenance, updates and training. These often have a disproportionate impact on smaller businesses.

There is often resistance to change, with many workers and managers accustomed to traditional methods of working. The lack of digital skills also raises issues. Outdated legacy systems remain prevalent and integrating them with modern digital technologies can be complex, time-consuming and expensive. Limited financial resources further restrict the ability of private enterprises and local authorities to invest in digital tools, stifling innovation. The absence of standardisation in digital construction practices can also lead to fragmented and ineffective use of these technologies, making interoperability between different systems challenging.

Government is starting to address digitalisation in construction

Several policies, strategies and initiatives at both state and federal levels have sought to drive digital transformation in the economy as a whole. At the Commonwealth level, the 2022 Digital Economy Strategy set a goal for Australia to become a top ten digital economy by 2030. This strategy outlines investments across different sectors to enhance innovation, cybersecurity and digital infrastructure, supporting economic growth by integrating digital capabilities.

Initiatives such as the 2021 Digital Government Strategy at the federal level and the NSW Digital Engineering Framework 2018 and 2022 at the state level aim to create a supportive environment for progressing greater digital adoption. They attempt to modernise federal agencies, making government services more accessible, efficient and user-friendly for citizens and businesses. In NSW, the Digital Restart Fund supports digital and ICT initiatives to enhance government services and operations. While these initiatives foster digital innovation broadly, they do not specifically address the challenges of the construction sector.

In NSW, the construction industry’s journey towards digitalisation has been influenced by the Design and Building Practitioners (DBP) Act 2020, the Residential Apartment Buildings (RAB) Act 2020, the government’s Smart Infrastructure Policy, the 2022 NATSPEC National BIM Guide and the NSW Innovation Blueprint 2035. While these policies and initiatives have made strides in facilitating digital adoption, they often fall short of addressing the industry’s specific challenges and providing comprehensive solutions. For instance, the DBP Act enforced the use of digital systems for lodging project documents. While this Act is a significant step forward in promoting digital documentation practices, it lacked support for advanced technologies such as automation or digital engineering practices that transform construction workflows. Meanwhile, the RAB Act and the Building Compliance and Enforcement Bill focus on regulatory frameworks and building quality but they do not address integration of emerging construction technologies.

The Smart Infrastructure Policy supports using digital systems to collect, analyse and share data, which can improve asset management. However, it does not fully address the sector’s need for integrating digital technologies, common data environments and supporting various construction projects and SMEs. Additionally, the NATSPEC National BIM Guide promotes greater awareness about BIM and offers a framework for implementation, but there are gaps regarding the necessity of identifying more precise roles, standardised processes and cultural change management.

The NSW Innovation Blueprint 2035 does, however, mark a significant policy shift by positioning innovation – including digital transformation – as central to addressing key state missions such as affordable housing and decarbonisation, both of which are closely tied to the future of construction in NSW. It emphasises cross-sector collaboration, investment in digital skills and the scaling of emerging technologies – all of which are critical enablers for sustainable innovation within the construction sector.

Government documents such as the WSU report for the NSW Building Commissioner and the NSW Roadmap for Digitalising, Planning, Design, Construction and Operation of Infrastructure reveal the industry’s complex challenges and the case for further action on digitalisation. Although these policies, strategies, initiatives and reports are a valuable starting point, they do not deliver a detailed policy framework that addresses the specific needs of construction stakeholders and the urgent actions needed to digitalise the sector.

Towards a comprehensive policy framework for digitalisation

The construction sector is peculiar in that over 90 per cent of enterprises fall into the category of micro, small or medium enterprises, commonly with low profit margins and high turnover. Such firms often have low capacity for investment in digital technologies, coupled with poor approaches to training and skill development. This makes the sector vulnerable to variations in general economic conditions. Thus, efforts to improve the state of digitalisation should take this context into consideration.

A solution is to develop a framework to drive digitalisation in the construction industry, especially for SMEs. This could improve the productivity and efficiency of the construction industry by fostering greater digital integration and serve as a blueprint for the NSW Government to take further action to digitalise the construction sector. Such a framework could encourage standardisation, boost investment in digital skills and streamline regulatory processes, facilitating a smoother transition towards digitalisation in the construction industry. It could also support the widespread and equitable adoption of digital technologies across all industry stakeholders, bearing in mind the dominant micro, small and medium enterprise profiles.

We are part of a collaborative research team from Western Sydney University and UNSW, developing a “Digitalisation of Construction Policy Framework”, supported by a Policy Challenge Grant from the Australian Public Policy Institute. Informed by multiple stakeholders from across the construction sector, the framework looks to comprehensively assess the current digital landscape across micro, small medium and large construction enterprises, evaluating their digital maturity levels and associated implications.

The framework will outline multiple directions under nine strategic objectives spread across four digital pillars. The attainment of the strategic objectives is assessed through carefully designed measures. The levels of governments best positioned to design and implement the policies will be based on the findings of stakeholder interviews. Ultimately, the framework will help drive productivity gains in a critical sector, boost efficiency and promote greater growth and resilience in the NSW economy.  Our work aligns with the mission of the NSW Industry Policy released in March 2025, by supporting innovation, sustainability and digital transformation in the construction sector to drive long-term economic and environmental benefits.

Digitalisation presents a critical opportunity to revitalise the construction sector in NSW, driving productivity, innovation and sustainable growth. However, achieving meaningful progress requires a targeted, sector-specific policy framework that addresses the industry’s unique challenges, particularly for micro-SMEs. Our research aims to support this transformation by providing practical, evidence-based recommendations for government and industry to accelerate the digitalisation journey.

Professor Srinath Perera is the Director of the Centre for Smart Modern Construction (c4SMC) and Chair of Built Environment & Construction Management at Western Sydney University. A chartered quantity surveyor and Fellow of the Royal Society of New South Wales, he is a leading researcher in construction informatics and digital transformation in construction. He has published over 200 works and led numerous international research projects, currently serving as President of AUBEA.

Dr Xiao-Hua (Sean) Jin is Associate Professor in Project Management at Western Sydney University and Deputy Director of c4SMC. With a background in both industry and academia, his research spans construction economics, risk management and digital innovation, with over 100 publications and recognition from the Chartered Institute of Building. He is actively engaged in national and international research networks and editorial panels.

Dr Marini Samaratunga is the Engagement Manager at the Centre for Smart Modern Construction (c4SMC) and an Associate Lecturer in Construction Management at Western Sydney University. With experience in academia, industry and government, her research focuses on sustainable design, low-carbon construction and digitalisation. She is a registered architect and has contributed to policy implementation within NSW’s planning framework.

The authors would also like to acknowledge the contributions to this article of Associate Professor Kathy Tannous (Western Sydney University), Professor Chyi Lin Lee (University of NSW), Mona Jahangir Zadeh (Western Sydney University) and Sachindra Hewavitharana (Western Sydney University).

This research is supported by a Policy Challenge Grant awarded by the Australian Public Policy Institute.

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