Can Building Watchdog Gains be Measured?

Monday, February 8th, 2016
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The federal government says restoring the building industry watchdog will boost productivity but the size of any actual benefit to the economy is difficult to know – a fact noted by the Productivity Commission itself.

As the government moves to re-establish the controversial Australian Building and Construction Commission (ABCC), ministers including Employment Minister Michaelia Cash have said it will boost productivity in the industry.

However, trade unions royal commissioner Dyson Heydon noted in his final report, delivered in December, that the impact of the watchdog on productivity could not be accurately measured.

Commissioner Heydon cited the Productivity Commission’s 2014 report on public infrastructure, which concluded the ABCC and its predecessor, the Building Industry Taskforce (BIT), “did not have a large aggregate impact” on productivity in the sector.

The Productivity Commission said there was no doubt that union and associated employer conduct on some building sites had adversely affected productivity.

However, it questioned the findings of reports, including studies by modeller Industry Economics (IE) for the Master Builders’ Association, that the watchdog had delivered a resurgence in productivity.

One 2012 IE report said abolishing the ABCC would destroy $6.3 billion in productivity benefits.

“When scrutinised meticulously, the quantitative results provided by IE or others do not provide credible evidence that the BIT/ABCC regime created a resurgence in aggregate construction productivity or that the removal of the ABCC has had material aggregate effects,” the Productivity Commission said.

The commission said this was unsurprising as it was hard to isolate the effects of industrial relations from other factors.

It concluded the BIT/ABCC era “is likely to have increased productivity” but said it was likely that restoring the ABCC “will not be sufficient to address the IR environment” because cultural and cyclical factors affected productivity as well, as much as poor behaviour.

Commissioner Heydon said the findings supported having a separate regulator for the building industry, separate from the Fair Work Ombudsman.

The former Gillard government abolished the ABCC in 2012.

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