Construction Productivity Genie Firmly Back in the Bottle 3

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Friday, February 27th, 2015
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In my opinion, the Abbott government seems uninterested in real reform such as construction productivity.

Rather, scoring a few political points by establishing a Royal Commission takes precedence.

Prior to this government’s election, the Council of Australian Governments (COAG) had been working on streamlining and improving the national licensing of building activity, building related occupations and standards since 2009. The Abbott government’s actions since include sending most of the key areas to do with lifting Australia’s construction productivity back to the states to run their own race.

A new Inter Governmental Agreement was signed by Ministers, taking effect in April, 2012. As at April 2013, COAG had not commenced in earnest on the building related occupations which were included in what COAG called the second tranche. Shortly after the Australian Institute of Building reported that “there remains uncertainty on when this work may commence.”

Former Victorian Premier Ted Baillieu at least tried to ginger up his interstate and national counterparts back in 2012. But his efforts were thwarted by the influence of unions on the then Gillard Labor government in having a national productivity review scrapped. Baillieu even prepared a business case for the incoming Abbott government on the need for national action in this area.

In December 2013, the Council of Australian Governments held the first meeting between the new Abbott government and the states. The Council’s final communique pronounced that “the States and Territories are sovereign in their own sphere. They should be able to get on with delivering on their responsibilities, with appropriate accountability and without unnecessary interference from the Commonwealth.”

This genie was always going back in the bottle under Abbott.

More alarming was the Abbott government’s failure to establish a credible national plan of action to lift construction productivity through the labour market.

The reinstatement of Fair Work Australia’s Australian Building and Construction Commission has been ideologically flawed from the outset. No one can define what improved construction productivity will look like and how it would be measured.

Other than establishing Nigel Hadgkiss as a “beat cop” to attempt forcing the rule of law on an out-of-control CFMEU, not much has been achieved. The much heralded ABCC legislation has been stymied in the Senate and following the recent Victorian election Hadgkiss’s foothold has been effectively put back in the bottle.

The pathetic way Victoria’s new Labor Premier Daniel Andrews went about announcing the scrapping of that state’s Building Code and Compliance Unit is a sign of his government’s debt to the CFMEU. If the Labor Party succeeds in Queensland it will most likely follow suit with similar actions. Victoria, let alone Queensland, can ill afford avoiding turning around key drivers of Australian construction’s chronic productivity decline by bowing to CFMEU industrial anarchy.

Abbott’s single focus on unions has ensured he overlooked the lack of appetite for serious construction productivity improvement amongst employer associations and the large constructors. All seem content with the status quo as evidenced by the lack of productivity initiatives in recent Enterprise Bargaining Agreements.

The construction productivity genie was fatally wounded from the outset.

Meanwhile, Australia’s international competitors transform their construction sectors to be part of a global game that takes no prisoners. It’s a pity the Abbott government does not get it. The government relies on construction as one of the nation’s main economic stimuli levers and a direct employer of workforce exceeding 1 million Australians. For now.

Putting the construction productivity genie back in the bottle has inescapable implications for a government clearly running out of ideas in a post mining and motor vehicle future.

With the NSW state election fast approaching all eyes should turn to what the Baird government and the Foley opposition have to say on this subject.

NSW is in an expansive construction phase which can only be sustained by dramatic improvement in construction productivity and lowering of its costs. Achieving these improvements is the only way to maximise the value of surplus redevelopment assets on one side of the ledger and achieving more for less infrastructure and services on the other side of the books. Otherwise, the electorate can expect the current boom in local construction and jobs to come to a sudden end.

In my view, the NSW Labor opposition are unlikely to do anything different to their Victorian and Queensland counterparts. It would be a good time for Luke Foley to come out and state his positions on the current wave of CFMEU activity in NSW, in particular the extension of bans on Boral concrete on some Sydney projects.

Politicians should be wary of ignoring construction productivity. It affects the competitiveness of every Australian enterprise and the affordability of every Australian home.

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3
  1. Andrew McGrath

    I have had an absolute gutful of the princesses that run industry in this country.

    For 17 years I have built software that integrates, in an increasingly dynamic way, the various silos of operation on increasingly large complex engineering and construction projects. I went through the mining boom, largely undercover on many projects – various Pilbara rail and port projects, an underground diamond mine project in the Kimberley, a coal jetty project in QLD, a gold mine project in NSW, a coal mine shutdown in QLD and others.

    The software is lined up for a $10b project in QLD (awaiting funding).

    This was inside many large construction companies and various joint ventures.

    Every time the accountants and lawyers discovered my existence I was extricated from the company. I have sat in meetings for 2 whole days with 10 managers on my side.

    I sat in a technology incubator lab for 15 months, built ready to go systems (gas project in PNG) but the company shut it down.

    In 2014 my platform disrupted the business model of a 10 year old/$10m (MS /Citrix et al) funded software development tools company in Boston.

    People like to joke that govt is full of princesses – let the truth be told.

  2. Rich Brew

    Thanks David, another good article.

    Fluctuations in the AUD are measured in microseconds, yet for the greater part the $ is backed by investments in bricks, mortar and inflated property values, resulting from the supply constraints mentioned, especially local government town planning.

    We believe that our AUD $ is worth its US $ value based on, inter alia, property values linked to this supply and demand.

    But that supply and demand paradigm is regulated by rocket scientists in Local Government.

    I'm not suggesting that financial markets should be alarmed, to the contrary, our failure to reform and plan for the progressive realisation of future bricks and mortar is bankable.

    Why mess with something when its returning dividends? Albeit short term.

  3. Giancarlo Vimercati

    Well what do you expect from a person that don't care about anything else but himself, like many other politician they first question is "what in for me?" that what they always have in mind, so forget them to be HONEST, HARD WORKING INDIVIDUALS for the benefit of the AUSTRALIAN people.
    Abbott make me laugh, he signed off on Prince Phillips knighthood was a payback for him to sign off his daughters entering the exclusive school in England.
    So you give me one, and I give you one.