SYDNEY--Australian construction costs are sharply higher, dampening hopes that surging inflation across the country will abate in coming quarters.

CoreLogic's Cordell Construction Index rose 10.0% over the year to June 30, the highest annual growth rate on record outside of the introduction of a 10% goods and service tax in July 2000.

Rising construction costs have been a big driver of a jump in Australia's inflation in recent quarters, which has in turn triggered a rapid rise in interest rates.

CoreLogic Construction Cost Estimation Manager, John Bennett, said the Cordell figures show the cost of metal, structural steel, reinforcing, fixings and fencing are under pressure, adding to rising prices across timber products.

"Suppliers are frequently mentioning the impact of rising fuel, freight and electricity costs on their bottom line and these are significant additional challenges being faced by the industry," he said.

"It is important to note these factors only add to other pressures that have impacted the residential construction industry for 18 months now, such as labor availability and overheads," he added.

Construction costs have increased more than 25% over the past five years, which has a knock-on effect on builders' margins, budget blowouts for customers not on fixed-price contracts, and home owners waiting for their projects to finish or even start in many cases, he said.

Write to James Glynn at james.glynn@wsj.com

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