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Thursday, 18 September 2003
Page: 20431

Mr ABBOTT (Minister for Employment and Workplace Relations and Minister Assisting the Prime Minister for the Public Service) (9:01 AM) —by leave—Problems in the construction industry mean higher prices, fewer jobs and a lower standard of living for everyone. Reforming the industry is not a matter of being `pro' or `anti' union. The challenge is delivering at least the same freedom, efficiency and value for money in the commercial construction industry as currently exists in the housing sector. The issue is tackling an industry culture which means that, for no good reason, building costs average 10 per cent more in commercial than in housing construction. Success means giving workers, managers and owners a fair return while delivering the best possible product at a reasonable price to Australian consumers.

Econtech, the respected analyst, has estimated that plastering the same wall in the same way costs 40 per cent more in a high-rise building than in a new home due to restrictions on who can do what and frequent work stoppages. Econtech also estimates that if labour productivity in commercial construction matched labour productivity in housing, the CPI would be one per cent lower, GDP would be one per cent higher and consumers would enjoy $2.3 billion in economic benefits every year. Commercial construction is a $40 billion a year industry. It is six per cent of the Australian economy. So problems in commercial construction affect everyone. They might not directly affect the homes people buy and the prices they pay—but they do affect the buildings where people work, the businesses which employ them, the wages those businesses can afford to pay and the prices those businesses charge. The construction industry would only need to be one per cent more efficient to unlock $400 million a year for more productive purposes. If the Australian government could save just one per cent on its annual $5 billion construction bill, there would be $50 million more every year to spend on schools, hospitals, roads and national security.

It would have been highly irresponsible of the Australian government not to tackle the problems of the construction industry. Despite comprising six per cent of the economy, the construction industry is responsible for about 60 per cent of all complaints of breach of freedom of association laws and 40 per cent of all days lost through strikes. Tenderers in Sydney typically allow one day lost through strikes every two months. Tenderers in Melbourne typically allow one day lost through strikes every two weeks. In early 2001, just before the establishment of the Cole royal commission, the NSW branch of the chief construction union, the CFMEU, was racked with corruption allegations and its national secretary had called for a federal investigation of criminal infiltration of the union.

The royal commission found that the commercial construction industry was characterised by illegal and improper payments, chronic failure to honour legally-binding agreements, regular flouting of court and commission orders, and a culture of coercion and intimidation backed by occasional violence such as site invasions designed to remind everyone in the industry who is really in charge. When the royal commission released its final report, the CFMEU and its allies disputed the significance of its findings but not the facts. In an unguarded moment, the CFMEU boss, John Sutton, admitted that `virtually everything we do breaches the Workplace Relations Act'.

Even so, there has been widespread scepticism about how much can really change. There is a temptation to conclude that industrial thuggery is inevitable in a physically tough industry not subject to the discipline of foreign competition and day-by-day public scrutiny. There is also a view that industrial racketeering might eventually go the way of the dinosaurs—but only after BLF organisers finally retire. Outside union officialdom, everyone wants the industry to change—but people invariably want someone else to change first lest they pay the price of challenging the union enforcers. This is a very human reaction but it means that people in the construction industry are denied the ordinary commercial freedom enjoyed by workers, businesses and customers in other industries.

The royal commission found that the unique features and distinctive problems of the industry mostly flowed from the union's determination to preserve its position as quasi-monopoly supplier of labour. Freedom of association rules are circumvented because the closed shop is the foundation of the union's power. Court and commission orders are broken because the union cannot accept that it is bound by laws it does not like, especially the law that says no-one can be forced to join. An undercurrent of violence is inevitable as the union deals with the handful of people who try to exercise freedoms which the law enshrines but, at least in this industry, largely fails to protect. Hence the chronic failure to respect the rule of law, which the royal commission identified as the industry's most besetting problem. Site invasions, hit men and secret pay-offs were the royal commission's headline-grabbing revelations but the underlying explanation is the union's determination to do whatever it takes to maintain the closed shop on which its power is based.

A gap in the Workplace Relations Act as it stands is its reliance on parties to enforce the law. Business is supposed to enforce the law against unions. Unions are supposed to enforce the law against business. The act is based on the assumption that it will be in the interests of parties to ensure that the law is respected and enforced. This is generally true in industries where companies have to be internationally competitive to survive. In these industries, unions use the law to moderate market reality and companies use the law to help ensure that they remain competitive. But parties do not, or feel they cannot, appeal to the law in industries where cost increases can always be passed on to consumers. In these industries, companies might win in court only to lose on site where bloody-minded unions have the capacity to create endless mischief.

In this respect, Australian workplaces resemble local communities with neighbourhood justice centres but no police force. Local justice centres are quite capable of sorting out disputes as long as everyone respects their authority. But with a serious neighbourhood bully, systems based on give and take and mutual respect just do not work because people eventually become too fatalistic to complain and the system has no leverage on troublemakers. The absence of a workplace `cop on the beat' is not a problem in most industries but has led to virtual anarchy in the commercial construction industry, particularly in Melbourne and Perth, because the CFMEU only keeps the commitments it likes.

That is why the royal commission's first report recommended the establishment of an interim building industry task force and that is why the final report recommended the establishment of a permanent industry watchdog with the power to investigate, prosecute and enforce judgments. The interim task force has been operating since October last year. So far, nearly 900 reports of possible unlawful conduct have been prepared, 13 briefs of evidence have been referred to other agencies for possible prosecution and the task force has commenced seven prosecutions of its own, involving five unions and three employers. The task force currently has more than 60 matters under active investigation with five briefs of evidence with lawyers for imminent court action.

Still, the task force is not the best long-term solution to lawlessness in the industry. It is not a statutory body and could be abolished by incoming governments, like the New South Wales and Western Australian building industry task forces. So far, a third of the task force's investigations have stalled because it lacks the coercive powers to gather evidence. Existing maximum penalties under the Workplace Relations Act of $2,000 for individuals and $10,000 for organisations are not an effective deterrent.

The president of the Victorian Institute of Building recently commented that the task force was working well but observed that the key difficulty in re-establishing the rule of law was people's reluctance to `give evidence against those of the far-from-philosophical persuasion'. Only a much more powerful watchdog will be able to compel witnesses, seek heavier penalties and enforce court orders given the commercial payback, workplace sabotage and backstreet biffo deployed against people who challenge the culture of the industry. Most people in the industry will not dare to believe it is really changing until some prominent identities are prosecuted, convicted and punished.

There is a big difference between effective law enforcement and what is called `third party interference' in workplace relations in the construction industry. The government wants an effective umpire to enforce the workplace relations rules—not a body which will take sides or dictate to people what is in their best commercial interests. This industry does not need a new body to facilitate negotiations—it needs a new entity to ensure that breaking the law has serious consequences.

Today, the government is releasing new draft building industry legislation providing for no strikes without secret ballots first, automatic cooling-off periods after two weeks industrial action, easier ways of calculating and enforcing damages, and an end to disqualified union officials obtaining right of entry under state law. The bill prohibits `closed shop' clauses in certified agreements in the industry and prohibits head contractors mandating subcontractors' workplace arrangements. It establishes a federal safety commissioner to ensure that successful tenderers for federally funded work are exemplars of occupational health and safety best practice. This should help to ensure that safety is not a mask for industrial disputes. Most importantly, the legislation establishes a new agency, the Australian Building and Construction Commission, to build on the good work of the task force.

The draft legislation implements 120 of the royal commission's recommendations for workplace relations change. It is important to proceed with the workplace relations recommendations now because this is the one area where the industry is unique and where existing institutional arrangements are manifestly failing to cope. The government is not neglecting the commission's other recommendations. Improved procedures for information sharing between the ATO, ASIC and state and territory revenue offices will help combat tax evasion, improve collection of workers compensation premiums and detect phoenix companies. Where the ABCC detects possible breaches of tax laws, failure to pay worker entitlements and neglect of safety regulations, these will be referred to the relevant federal or state agency. Although the industry has significant tax, safety and workers compensation problems, there are existing bodies to deal with them. What is missing from the industry is a workplace relations policeman with duties and powers over industrial lawlessness similar to those the ATO has in relation to tax avoidance.

The government has decided not to adopt the recommendation to give the ABCC parallel jurisdiction to enforce the Trade Practices Act in the construction industry. Instead the new commission will refer matters to the Australian Competition and Consumer Commission under a memorandum of understanding. The ACCC's recent action against three unions in relation to industrial stoppages at a Gippsland gas plant is a sign that the ACCC can be active and effective in the industry. In addition, the ACCC will investigate whether unregistered industry agreements in Victoria, Queensland and Tasmania breach the Trade Practices Act.

The construction industry often seems like a conspiracy between big unions and big business against small business and consumers. Subcontractors, especially, often seem like the meat in the sandwich, squeezed between politically motivated unions and profit-driven builders and developers. Some state governments have enacted security of payments legislation to address subcontractors' understandable concerns. The government is still considering whether to proceed with federal security of payments legislation, as the royal commission recommended, because it is concerned about the extra levies and rigidities which this might impose on business, consumers or taxpayers. There are ways to reduce risk such as COD work and commercial insurance which do not eliminate moral hazard. Nevertheless, the practice of demanding retrospective payment from subcontractors, which has been likened to the corporate equivalent of compulsory union levies, bears examination. The government will ask the ACCC for its advice on this practice and, in particular, whether this infringes the act's prohibition of unconscionable conduct against small business. The government has already announced that it will adopt the recommendation of the Dawson report to give small business more capacity to collectively negotiate with large business.

The royal commission conducted 171 days of public hearings and heard 700 witnesses. Its final report provides a compelling case for reform and its recommendations are the foundation of this bill. The bill is now publicly available as an exposure draft. Over the next month, the government will consult further with workers, managers, owners and customers of the industry. The government will carefully consider all submissions which address the need for structural and cultural change but is not prepared to conclude that there are no problems in the industry that talking cannot fix. The government will seek to have the draft bill referred immediately to a Senate committee so that legislation can be introduced into the House of Representatives in the first week of November and, with the cooperation of the Senate, dealt with by the parliament before Christmas. The rule of law must apply on building sites no less than in residential neighbourhoods. New institutional arrangements are needed to uphold the rule of law if the honest workers, owners and consumers of Australia are to have the clean construction industry they deserve. I conclude by presenting the following paper:

Royal Commission into the Building and Construction Industry—Ministerial Statement, 18 September 2003.

and move:

That the House take note of the paper.

Mr McGAURAN (Gippsland—Deputy Leader of the House) (9.17 a.m.)—by leave—I move:

That so much of the standing and sessional orders be suspended as would prevent Dr Emerson speaking for a period not exceeding 15 minutes.