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Economics References Committee
Non-conforming building products - use of non-compliant external cladding materials in Australia

ATTWOOD, Mr Graham, Director, Expanded Polystyrene Australia

HILLS, Mr Rodger, Executive Officer, Building Products Innovation Council

Committee met at 08:31

CHAIR ( Senator Ketter ): I declare open this hearing of the Senate Economics References Committee for the inquiry into non-conforming building products, external cladding materials. The Senate referred this inquiry to the committee on 23 June 2015 for a final report by 31 October 2017. The committee has received 155 submissions so far which are available on the committee's website.

This is a public hearing and a Hansard transcript of the proceedings is being made, although the committee may determine or agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of the evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken, and the committee will determine whether it will insist on an answer. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time. I ask photographers and cameramen to follow the established media guidelines and the instructions of the committee Secretariat. Please ensure that senators' and witnesses' laptops and personal papers are not filmed.

I now welcome a panel of representatives from the Building Products Innovation Council and Expanded Polystyrene Australia. Thank you for appearing before the committee today. I invite you to make brief opening statement, should you wish to do so, and then we will open it up for questions.

Mr Hills : BPIC, Building Products Innovation Council, wishes to thank the Senate Economics References Committee for the opportunity to appear before this public hearing. We support the Senate inquiry into non-conforming building products, as the prevalence of building products not meeting relevant Austrian standards and codes has increased significantly and is in step with increased global sourcing and purchasing practices in recent years.

BPIC would urge the inquiry to bear in mind that non-conforming building products are a persistent and endemic problem in the building industry. Therefore, the strategy and tactics required to eliminate them must work across the building spectrum and not product by product, product group by product group or as a reflexive response to a recent crisis or recent crises, such as Grenfell Tower in the UK. While there is much concern about high-profile issues like non-conforming cladding, these instances can have the effect of overshadowing a broad supply chain and construction problem. While the National Construction Code has focused on ensuring that products meet minimum standards in code compliance, far less emphasis has been placed on ensuring that products are used only for the purposes for which they are intended. This is a significant weakness in the current code and regulatory regimes in Australia that requires immediate attention.

Our first submission to the Senate inquiry emphasised this and made a range of recommendations, 19 in all, that the federal and state governments could or should adopt. We are concerned that, given the urgency of the situation, after the passage of two years few of these recommendations have been implemented. We would urge the inquiry to move as quickly as possible to conclude its deliberations and produce a report that can be acted upon by government and industry. The building products industry in Australia is, and always has been, self-reliant and self-funded, and is confident that the measures outlined in our submissions, as well as the submissions of our colleagues in the industry, will help create a level playing field. This will lead to good outcomes for consumers and taxpayers as well as strengthen the national economy. This concludes my opening statement. I would be happy to answer any questions you might have regarding my statement or our submission.

Mr Attwood : Thank you for the opportunity to speak to you today on behalf of the Expanded Polystyrene Australia group. The EPSA group represent a number of EPS manufacturers throughout Australia and has been in existence for over 20 years. I would like to make reference to the overview in the submission that we sent forward and to the fact that there are key issues with specific product related applications which we would like to recommend to the Senate hearing. These specifically make references to several particular areas. First of all, there is a need for common standards across Australia and moving away or combining the state-by-state based building codes into a more robust and fully encompassing National Construction Code, specifically with relation to the product lines that my group manufactures. There are no specific areas in the code that determine high levels of quality standards, particularly when it comes to fire related mechanisms for the products, and in particular cladding and cladding related issues. At the moment within my membership there are two particular product lines that can come into the country and are manufactured within Australia: fire-retardant and non-fire-retardant. There is currently no requirement that specifies a fire retardancy mechanism for the product lines that are manufactured to put into building products.

Senator XENOPHON: What do you mean by that?

Mr Attwood : There are two actual product lines. One is fire retardant EPS and the other is non-fire retardant EPS. You might be familiar with the good old 18-litre eskies. That is non-fire-retardant expanded polystyrene. However, over the past 20 or 30 years a lot of products have now moved into the building products arena and there's a fire retardant grade of material that should, as far as my organisation is concerned, be mandated. All the groups that work within EPSA mandate it, but it is a voluntary code. We're certainly aware and have had anecdotal reports of certain products being used within the Australian building sector that are non-fire-retardant.

CHAIR: To be clear, you're saying that the Building Code does not mandate fire retardant forms of polystyrene to be used as building products.

Mr Attwood : For certain building products, correct. The National Construction Code has not developed and been amended to keep pace with the technology of the building lines. There are certain product lines now that exist and have been implemented within commercial and domestic buildings that do not have the specific call-up of Australian standards. Some of the Australian standards that currently exist do not make reference to these new brands of building products, so there's a need for those Australian standards to be amended and be called up by the National Construction Code to align all building products made of this particular material to require fire retardancy grades.

CHAIR: Are there buildings out there at the moment that have used building products made of non-fire-retardant polystyrene?

Mr Attwood : Within the organisation we have had reports come in. We haven't had any audited or validated reports, so it would be difficult for me to specifically say there are. We have had reports come in, particularly for domestic housing, of non-fire-retardant-grade insulation foams being used for that. I cannot specify and determine exactly—

CHAIR: So that is anecdotal?

Mr Attwood : That is anecdotal, yes.

CHAIR: That is a major concern.

Mr Attwood : I would hasten to add, we actually haven't got any defined data to validate that. I would also hasten to add that it is in the construction phase, so it is difficult to visually determine whether a product line has actually got this incorporated fire-retardancy or not. You would have to go through a chemical analysis or a fire-burn test to determine that. The EPSA has mandated within its membership that all building products must contain the fire-retardant grade of EPS. That is a voluntary compliance mechanism. What we are looking for through the recommendations is to mandate in a far more robust way and have our auditors approve that.

Senator XENOPHON: Are you saying that because it is a voluntary code, if you do not comply with the code there are no consequences? So you would be using building materials that are non-fire-retardant—in other words, don't offer any protection in the context of a building fire and there is nothing to stop those non-fire-retardant products being used.

Mr Attwood : The National Construction Code calls up certain Australian standards. Those Australian standards have elements of fire protection requirements mandated. However, those Australian standards do not have the widest spread of applicability to all the building products. The Australian standards have not kept pace with the building products that now exist and the new technology that has been brought in over 10 or 15 years.

CHAIR: But polystyrene has been around for a while.

Mr Attwood : Correct.

CHAIR: So there really should not be any excuse for the standards to not comprehend the fact that we have building products made of this material.

Mr Attwood : I will perhaps explain and expand on that. Development of some of the building products has moved on significantly from when the Australian standards were first implemented. So now there is a need to amend those standards to adapt to the new building products that exist because 15 and 20 years ago the applicability of EPS building products was quite low and quite simplified. It has moved on quite considerably. So the standards need to adapt and adopt an applicability test to these new product lines. The association is looking for a global approach to say any building products whatsoever that are used in either domestic or commercial buildings absolutely need to have flame-retardancy EPS as part of the primary mechanism to limit fire.

CHAIR: Do you have a view as to whether there are other building products where technological progress has marched on and the standards have not kept up?

Mr Attwood : I have a personal view but I am not an expert in that area, so I am afraid I cannot answer that.

CHAIR: Mr Hills?

Mr Hills : There would certainly be products that are beyond the standards that apply to that sector in the same way as expanded polystyrene. The difficulty is it literally takes years to write a standard and more years to amend that standard. A lot of the issues are that the industry has to come together, there is voluntary involvement within the standard writing process and there are a heap of technical challenges in making sure that the standards apply in the way they are supposed to apply and things like that. So getting standards correct is a very difficult and time-consuming process. Usually by the time it is correct, technology has moved on. I think that applies to a number of product groups not just this.

Senator XENOPHON: Are you saying that the current process—the four-year period, the various iterations, being voluntary—is just too cumbersome and too flawed in its current form? Particularly where there are safety issues involved, the process needs to be more streamlined and quicker and more effective.

Mr Hills : That would help, yes.

Senator XENOPHON: How would we do that, though? There is this process now of changing the standards and getting them into the code. How would you do that?

Mr Hills : I am not a standards expert in terms of how the committees get together. The difficulty we have, I suppose, is that the people who advise the standards committees are all voluntary people who come together at their own cost, their only expense, and who give their IP and their expertise. That then gets turned into a standard and then the standard gets sold to the industry, and people have to purchase the standard. Because they have to purchase the standard, generally people don't use the standard because it's a cost burden. There needs to be a change to the way, and I think there is a change to the way, that Standards Australia and SAI Global, whoever is going to publish, actually do their thing. It appears to be that IP is being collected and hoovered up from industry, turned into a standard and then sold back to industry again. We believe there needs to be a streamlined process within Standards Australia. What that is, I am not—

Senator XENOPHON: Sure. Mr Attwood, do you have any other thoughts on that?

Mr Attwood : I would absolutely reinforce that, having spent 30 years in the manufacturing sector. There is a disincentive for industry groups to participate because of the cost and the efficiency involved in inputting and participating in developing Australian standards. There's certainly a disincentive. It's not the highest priority, and, relatively speaking, it's a cumbersome way of actually getting best practice into a strongly organised conformance mechanism. The efficiency is not strong, and I guess it's not seen to be a priority for many organisations who are there trying to survive on a day-to-day basis. Certainly, the efficiency and the cumbersomeness need to be looked at.

CHAIR: I'm conscious that we might've interrupted your opening statement, Mr Attwood, but do you have a view as to how that process could be improved?

Mr Attwood : Certainly ongoing collaboration between the different stakeholders, but, at the same time, streamlining of the national code and the state codes would certainly be something we need to have a very serious look at. But we are talking about a time pressure, and certainly with the industry group there is a need, absolutely, to make some very strong inroads into, in my particular case with my industry group, having very simplified immediate steps forward, which is mandating flame retardancy on building and construction projects for this particular product. That's a black-and-white yes or no and would very much enhance the immediate issue associated with that.

Senator XENOPHON: Sorry; I find it staggering that flame retardancy wouldn't be mandated now. I think if you ask most people, they would assume that the buildings that they are in, the buildings that are being built, particularly now, would be flame retardant.

Mr Attwood : There are loopholes in the Australian standards, and there are loopholes in the NCC, the National Construction Code, that allow certain product lines to fall into play. That may or may not be a conscious decision, but, in the whole building process, once an approval is given to construct a domestic or commercial building, the next stage on is to look at ways and means to minimise cost in the construction phase. Sometimes loopholes are found to actually implement and move away from this, while still supposedly compliant with the broad element of documentary compliance; however, the specific and detailed areas of, for instance, applying certain Australian standards to this particular code have got flaws and have got holes in them that need to be tightened up.

CHAIR: Should non-fire-retardant polystyrene building products be allowed in the country?

Mr Attwood : Absolutely not. If I can just expand on that: not only not allowed into the country, but not allowed on buildings because Australian manufacturers in my area can actually manufacture flame-retardant and non-flame-retardant polystyrene foam. I would go further than what you have perhaps just suggested: non-flame-retardant EPS material should be banned from all workplaces and worksites. They should be limited to the traditional packaging areas, not building and construction.

CHAIR: And shouldn't be manufactured in the first place.

Mr Attwood : No.

CHAIR: You were suggesting—

Mr Attwood : I don't agree with not manufacturing. Manufacturing absolutely should take place. We have a strong manufacturing industry for this particular product line in Australia, but—

CHAIR: Under what circumstances can a building product made of non-fire-retardant polystyrene be used?

Mr Attwood : Sorry, I misinterpreted your question. For all applications in building and construction, the only EPS material that should be allowed is flame retardant.

CHAIR: Thank you.

Senator XENOPHON: The fact that we are supposed to have a standards system in place, the fact that we are supposed to have a National Construction Code, and you're telling us this morning, and I accept what you tell us, that there are loopholes in place that actually have profound implications for public safety: how did we get to this stage, particularly given the warnings we had with the Lacrosse fire back in 2014? Indeed, that was the instigator of this inquiry in the previous parliament. This is obviously something you have been agitating for for some time. Have you made representations, and to whom? Have your concerns fallen on deaf ears?

Mr Attwood : The concerns with regard to flame-retardant products have not fallen on deaf ears. As I mentioned earlier and in the submission, I cannot give you any specific auditable, validated areas where this has taken place. These are anecdotal pieces of information.

Senator XENOPHON: There should be an audit though, should there not?

Mr Attwood : I believe so, but if I just take the next stage on from that: you were asking about where this has fallen down. There is quite a significant gap in the inspection site during the building phase.

Senator XENOPHON: Say again: you are saying there is an inadequacy of rigour, a lack of rigour, in terms of the inspections phase?

Mr Attwood : Correct.

Senator XENOPHON: Was that a matter for state regulators or local government regulators? Who handles the inspection phase?

Mr Attwood : Basically it's a state inspection mechanism, but it is also across the board. It also rolls all the way back through to things like specifics of analysis, codemarking mechanisms and auditing processes during that manufacturing and installation phase. There is a really big area of concern around—once the design is actually signed off and mandated, working all the way through to the construction phase and during the implementation stage, there is a gap there. There's a significant gap in terms of ensuring that the installation applies to the standards and is of good quality. It's one thing looking at building products, but, alongside building products per se, the installation also is absolutely critical to maintain that line and that chain of protection for particular fire protections.

CHAIR: Mr Attwood, I hear you saying that there are problems across the supply chain and regulators have responsibilities within certain parts of the supply chain. Would you agree with the proposition that there is a lack of national oversight of the whole of the supply chain, a lack of somebody ensuring, from end to end, that the safety of end users and residents or people working in these buildings is actually uppermost in their mind?

Mr Attwood : I would answer that question by suggesting that each part of that supply chain has elements of audit and quality assurance that needs to be in place. Some areas are strong and some areas are less strong. To have an oversight into the complete supply chain, I struggle to see how such a complex mechanism could actually be fully undertaken.

CHAIR: We have a National Construction Code.

Mr Attwood : Yes, but the National Construction Code doesn't necessarily take into account all of that area. That needs to be tightened up. There's an element of oversight for sure, and my particular group is advocating having (a) a national approach and (b) a consistent approach from state to state, because these product lines and installations might be designed in one state and implemented in another state. So there is certainly an overview mechanism that can take place, but I would not be advocating removing focus on that quality assurance mechanism for each of the elements—

CHAIR: I am not advocating that; I am just saying that in the absence of some central or national oversight of that system, it's too easy for people to point the finger of blame at somebody else along the supply chain, which is what we are hearing in this inquiry.

Mr Attwood : I agree with you, yes.

CHAIR: Someone needs to say, 'We need to stop the blaming of other people and let's take responsibility for this'.

Mr Hills : To answer your question about how we got to here: it's a longwinded saga. Basically, over 10 or 15 years, the supply chain has changed dramatically. Going back 10 or 15 years, most products were made in Australia by manufacturers in Australia, so the code requirements were known and all the processes were in place. Once our supply chain became global and opened up, a whole plethora of new products came into the marketplace. The code, the National Construction Code and the standards have not kept up with that. The way that the Building Code and the NCC have developed over the years is that it was actually upgraded every year. What would happen is that some parts of the code might be updated and other parts of the code might not be, so you sometimes had parts of the code not actually articulating with each other. So wherever you have a situation where two parts of the code don't articulate, you end up with loopholes. And it is the same thing with standards. It takes four years at best to get a standard through the system. Within four years a whole multitude of new technologies and products can come into the marketplace—in EPS, in glass, in steel. So it is a process where the regulatory and code compliance systems that we have have been trying to catch up with a rapidly changing world, and I think we are in a situation now where there are gaps.

CHAIR: We're constantly trying to shut the door and the horse has bolted.

Mr Hills : Exactly; that's right. And, then, trying to write a standard in a predictive way is very difficult because you don't know what new technology's going to come round the corner. If the standards process could be sped up, it could be fairly arranged so that industry actually was compensated or at least given some incentive to be involved. If standards that were actually published at the end of the day weren't so expensive and people could actually use them—in the same way that the NCC is now free and people can access it—that would reduce those barriers to people understanding what the requirements are.

Senator XENOPHON: I will just follow that question. Mr Hills, you made the point that standards should be free. One of the reasons for noncompliance or nonadherence is that it's a commercial operation. I'm not being critical, but that's how it has developed. But when it comes to these issues—to standards that relate to issues of safety—you shouldn't be charging a fee for it. It should be something that's readily available, should it not?

Mr Hills : That's what we're saying. The standards should be free; they're not.

Senator XENOPHON: But the way Standards Australia is structured it works on the basis of making a quid. It funds itself by charging people for the use of the standards; correct?

Mr Hills : At the moment, that's its role. It was actually changed in 2003. It used to publish its own documentation. Then a Productivity Commission report said that that was actually a conflict of interest, which was when SAI Global became the publishing arm and Standards Australia became the body that produced the documentation. So Standards Australia takes a percentage of the royalties that are achieved from the publishing of the documentation. But those documents, those standards, cost huge amounts of money, and if you're a manufacturer you can be up for thousands of dollars. Part of the reason people aren't complying with standards is that they don't know what the standards are because they haven't bought them, and the reason that the NCC has gone from being a couple-of-hundred-dollar book to free is to actually get over that problem of people using those codes and being aware of those codes.

CHAIR: We also heard from Mr Savery from the ABCB. He talked about the fact that, at the same time as we had the globalisation of the supply chain, we also moved away from mandatory inspections of buildings. Do you see that as being part of the problem here?

Mr Hills : Absolutely. It goes back to what Mr Attwood said. A big part of the problem we have at the moment is that the regulatory bodies within each state and territory over the years have, for whatever reason, been under-resourced or lacking resources. I have seen that it's been very, very difficult for them to regulate, so they're not actually inspecting buildings to the extent that they used to, so many of these products simply get on and nobody checks. And, at the very end of the stage, it's up to the certifier, who's been given all of the responsibility to check things out. And the building certifier, even the very best of them, will struggle trying to do that. I've just come back from Queensland where the Queensland government is looking at a new bill to try to spread the risk and the responsibility for compliance across the supply chain rather than leaving it to the very end. We think that that's a very healthy, sane and intelligent way of going, and we are advocating that each state and territory should actually look at something like that.

Senator XENOPHON: Do you think it's a good bill?

Mr Hills : We do think it's a good bill, yes.

Mr Attwood : I'd like to make a further comment to that. The advancements in building technology and building products technology have put tremendous pressure, if you like, on the inspection mechanisms. From an educational perspective, it is almost impossible to expect the building inspectors to be across every single technical detail of every single product line. There is and can be a tendency for a little bit of a tick-and-flick approach where the educational process of the inspectors might not be up to speed with the specific technical and installation requirements.

Senator KIM CARR: We've just come from a meeting of sprinkler fitters. The sprinkler fitters told us that there are a number of problems with the certification process. They say that people are certifying product as being fit for purpose when they're not physically inspecting it. Are you aware of that practice?

Mr Hills : Yes, I am, but there is no quantitative way of telling that.

Senator KIM CARR: So you are saying that people would certify a building as being fit for purpose, but they haven't physically examined it?

Mr Hills : Yes, that has happened.

Senator KIM CARR: They also say there are fly-by-night companies that operate, where the proprietor might be licensed, but everyone who works for the company is not. The people actually doing the work are not licensed. Are you familiar with that practice?

Mr Hills : Yes.

Senator KIM CARR: Is it widespread?

Mr Hills : Again, it's very difficult to tell you factually about quantities because we don't know, but I can tell you that it does exist.

Senator KIM CARR: It does happen? You're aware of it?

Mr Hills : Yes.

Senator KIM CARR: We are also aware that people who are unqualified are undertaking that work. They are brought in—we were told Pizza Hut managers might be brought in—to do inspections and certifications. They are totally unqualified. You say they're not technically competent because of the latest technology, but they're not competent at all. They have no trade qualifications and are not actually suitable for the job—not fit for purpose.

Mr Hills : That would happen—yes. Again, I can't tell you exactly where and—

Senator KIM CARR: But, in your experience, you can confirm that this actually occurs?

Mr Hills : Yes. It is one reason that I think our industry and the building manufacturing industry would like to have licensing of installers.

Senator KIM CARR: I'll come to that in a minute. I am happy to talk that through. I want to deal with another issue that's been put to us and that is the question of fraud. Certification is provided to say that a building's componentry is compliant, but the certificates are fraudulent. Are you familiar with this practice?

Mr Hills : Absolutely. We have a lot of qualitative data about that. One of our members, the Australian Window Association, has literally thousands of documents that are fraudulent—

Senator KIM CARR: Thousands?

Mr Hills : Yes, and they can provide evidence.

Senator KIM CARR: Could we have that? Is it possible to have that?

Senator XENOPHON: Chair, given that revelation from Mr Hills—and we need to emphasise that the Australian Window Association has been a long-term advocate on non-complying and non-conforming products and has been a great advocate for Australian manufacturing and for appropriate standards—perhaps we could write to the Australian Window Association to ask for the fraudulent documents that were referred to that came into their possession.

Senator KIM CARR: We need to have the detailed evidence. It's been put to us that the fraudulent certification practice is widespread in the building industry. Are you aware of this being brought to the attention of authorities?

Mr Hills : Yes, we are. We have made submissions at the state level. In our original submission to the Senate inquiry we said that fraudulent documentation is a massive problem within the industry. Since at least I've been part of the Building Products Innovation Council, which is the last three years or so, but even before that, we have been saying that it is a massive issue.

Senator KIM CARR: Could you detail the broad areas in which the fraudulent documentation occurs?

Mr Hills : A large part of it—I won't say all of it—is from imported products. The imported products, for whatever reason, can be tested to varying standards and not necessarily the standards that people think. The documentation could be completely fraudulent, with no testing done at all. There has been forging of NATA certificates and forging of industry code certificates and things like that. It gets very difficult then for a building certifier or an engineer who is trying to check, to think that they are actually getting what they are doing. If you look at the asbestos contamination in the Perth hospital, the builder had all of the proper information and all of what they believed to be relevant certification documentation, which turned out not to be correct. We have evidence of those as well.

Senator KIM CARR: When this matter was put to public authorities and regulators, was any action taken?

Mr Hills : We are not aware of that, no. It has been talked about, and we have advocated that one of the potential ways of overcoming that is to expand the definition of 'building products' within the ACCC's definition of a 'consumer good', because, at the moment, if somebody comes across fraudulent documentation, who do they report it to?

Senator KIM CARR: The police. What about the police?

Mr Hills : The police will turn around and say, 'That's not our jurisdiction.' If they take it to the ACCC, the ACCC will say, 'It's not our jurisdiction.' So, at the moment, there is nowhere to report lots of these instances because simply there is nothing there.

Senator KIM CARR: So you are advising this committee that, where there is a clear case of fraud—the criminal definition of fraud—there has never been a prosecution?

Mr Hills : Not to my knowledge. I do not believe so—not in terms of product certification.

CHAIR: And furthermore you are saying that there is a grey area as to which would be the appropriate enforcement agency?

Mr Hills : Yes, and there are gaps and loopholes in that area because it is not clear who is going to take responsibility for prosecuting these issues.

Senator XENOPHON: Which sends a clear message to those involved in the fraud in the first place that they can keep doing it again and again.

Mr Hills : It is big business.

Senator KIM CARR: This is big business—there is a lot of money to be made. It has been put to me that there are occasions where money changes hands on these matters. Are you familiar with that?

Mr Hills : I do not know if money changes hands or it doesn't. I would imagine that money would have to change hands, because fraudulent documentation costs probably as much as or almost as much as genuine documentation does.

Senator KIM CARR: We often hear of that sort of corruption in other countries. Are you aware of any of that type of activity occurring in this country?

Mr Hills : Yes.

Senator KIM CARR: In what fields?

Mr Hills : In a number of fields. I used to be the CEO of the Association of Building Sustainability Assessors—the people who do the energy ratings on homes—and we were constantly looking at fraudulent NatHERS documentation that was submitted. So it is not just building products documentation; it is certification documentation.

Senator KIM CARR: Are you saying that people take bribes to accept false certification?

Mr Hills : I do not know whether they take bribes or how the money changes hands or what incentives there are. It may not necessarily be a monetary thing; it might be the fact that somebody produces fraudulent documentation in order to get something reduced or to speed the process through—those sorts of things.

Senator KIM CARR: Again, that might well be argued as secret commissions.

Mr Hills : Absolutely. Yes it is.

Senator KIM CARR: That is a criminal offence.

Mr Hills : Yes.

Senator KIM CARR: But you are saying that no action has been taken?

Mr Hills : Again, those reports, as I say, when I was CEO of ABSA were reported to the state regulator, and the state regulator looked into them and, at the end of the day, they said, 'There's nothing we can do; we don't have the jurisdiction; we don't have the power.' If you look at, say, the QBCC—we had a conversation with them recently—their current powers allow them to look into the licensing of their licensees, but, if it is beyond that, if it is a manufacturer producing fraudulent documentation, it is outside their powers.

Senator KIM CARR: It is just that the question of licensing comes up and the question of regulatory enforcement comes up, and the evidence before the committee is that everyone's got someone else to blame. This is one of the great buck-passing exercises I've come across, and this is my 25th year in the parliament. And it seems to be endemic. Subcontractors blame builders and builders are able to blame architects and then surveyors engineers—it goes on and on, to the point where certifiers are actually signing documents that they are not entitled to sign and insurance companies are then saying, 'We're not going to pay out on a claim because someone is at fault,' and the tenant or the occupant of the building is then left with the liability to clean up.

Mr Hills : That is right.

Senator KIM CARR: Is there not a need here for us to break through all of that and have some sort of national licensing system in place for the building industry, as to people who are installing products, and in terms of the actual application of the national building codes?

Mr Hills : The building products industry, or the building products manufacturing industry, would be supportive of a national approach, whether it be a single national body or a harmonisation of state-based things—

Senator KIM CARR: But that could take years and years. It's like the railway gauges question. It might take us the best part of the next century to sort that out.

Mr Hills : Exactly. Our dilemma as an industry is: we want this stuff to happen, but the mechanisms to make it happen are just like watching grass grow. That's our difficulty.

Senator KIM CARR: Clearly, the issues of privatisation and deregulation have left us with this dreadful legacy. Would you agree with that assessment?

Mr Hills : Absolutely.

Mr Attwood : Yes.

Senator KIM CARR: Trying to identify who's actually responsible seems, to me, to be a never-ending task. The question will be, as far as the public is concerned, given that public safety is paramount here: what action can we take to actually break these deadlocks? It comes down to what national regulatory regime we should put in place. That's what we'd be interested to hear from you on—what action can be taken by the national parliament. I'm thinking particularly about licensing, because we do have some capacity through the training regime to actually put in place national licensing for installers and people actually putting the product together, which can also put in place standards that will not be able to actually fit non-compliant products. Do you think there is any merit in that type of approach?

Mr Hills : Certainly. There are things that we believe the federal government is better placed to do as opposed to the states. One of the recommendations that could come out of this committee is that the ACCC reviews its definition of 'consumer products' to broaden that out. Another recommendation could be to look at Border Force and say to them: 'At the moment, you're looking at drugs, arms and that sort of stuff as a priority. There are priorities in other areas, such as asbestos and flammable products.' There are things in terms of, like you said, actually nationalising the licensing arrangement for installers. One of the biggest issues that we have is that, even if you do have a fully compliant product, the potential for that product to be used in an inappropriate application is very high. Licensing of installers would help to reduce that problem significantly, whether that's done at a national level or it's—

Senator KIM CARR: Let's start at the national level. You won't get national consistency. Then, the question will be: what standard do you do it at? We could go for the lowest common denominator, which is the worst feature of our federation. You'll need to be at a standard that's actually going to ensure quality.

Mr Hills : That's right. The beauty about a national standard for installation or licensing is that, if somebody is actually licensed within Victoria and they go to Queensland, that licence goes with them. They don't have to change—

Senator KIM CARR: That's what I'm saying. National consistency is critically important here.

Mr Hills : That's right.

Senator KIM CARR: But there are, at the moment, circumstances where you can be a builder in Victoria and not require any qualifications whatsoever. That's clearly not appropriate.

Mr Hills : That's right. What you'll find is that the state acts which actually regulate the building activity within each state have been written in a way where most of them place all of the responsibility on the building certifier. They put implied warranties onto the builder and the installers. We would argue that that is fine, except it means that there's no duty of care in a direct way to the end user, the developer or the end purchaser. One thing that could be done is we could encourage the states to actually look at their building codes to actually build responsibility in and be very overt about what responsibility the builders have and what training they require—have all that stuff actually written into the building acts and not have such a reliance on the building certifiers to fix everything.

Senator KIM CARR: The problem is: if you say to the states, 'We want you to have a look at it,' they'll get the mirror out and they'll have a look into it. It will take a hell of a long time before anything's actually done. That's why I'm saying there may be a more urgent response.

Mr Hills : And we would support that. That would be great if we could work out how that could be done, because the problem that we have is that housing, I believe, is not something that the Commonwealth government has jurisdiction over constitutionally.

Senator KIM CARR: But the Commonwealth has responsibilities under the Corporations Act?

Mr Hills : That's right.

Senator KIM CARR: Clearly, it can ban non-compliant products. There's no question about its capacity to act on that level.

Mr Hills : That's right.

Senator KIM CARR: But it has capacity under the training regime in terms of the Commonwealth funding powers?

Mr Hills : Yes.

Senator KIM CARR: So there are Commonwealth heads of powers that can actually act here?

Mr Hills : Yes.

Senator KIM CARR: The question is: is there a political will to reregulate what has now become a pattern of deregulation and privatisation which, as I said, has led to this disaster?

Mr Hills : And the industry would support all that. I suppose I cannot articulate the details of how that would unfold, because you are putting me on the spot. But I can tell you that the building industry would support nationally consistent approaches to training, licensing and banning of non-complying products and buildings and those sorts of things.

Senator KIM CARR: I have just one final question. The proposition has been put to me numerous times in terms of my work in industry, and it is the decent employers, the decent, reputable companies, that actually want to see proper regulation, because it provides a level playing field for them. It's the fly-by-night corrupt operators that what deregulation and a capacity to undercut people and to not have anyone call them to account. Would that be fair?

Mr Attwood : Absolutely correct, that's right.

Mr Hills : There is also, unfortunately, an argument used about affordability and that we can't have more regulation because it is going to affect housing affordability. We would argue that affordability needs to actually include minimum standards. Building should be safe, regardless of how much it costs. So the use of the word 'affordability' can sometimes be used as a means to either restrict the amount of regulations or to water things down.

Senator XENOPHON: Or red tape. That's the mantra isn't it?

Mr Hills : Or red tape. I would say another thing, and you were talking about a level playing field, just to give you an example of what's happened recently. Viridian is a CSR company and has spent $140 million building glass plants in Australia to produce double-glazed glass of high quality. They have just gone out of business and have closed the Viridian plants down because they have been undercut by imported glass from China. They simply cannot support their supply chain or their product.

CHAIR: Does that product to meet the same standards?

Mr Hills : Probably not. It is not absolutely guaranteed that those products from overseas are not compliant. They may be compliant, but the fact is that Australian manufacture has closed down due to an uneven playing field.

Senator KIM CARR: Yes, so the point is that, with proper safety standards, we may in fact help build national capacity to meet those standards. Is that the proposition you're putting to us?

Mr Attwood : I would agree with that comment.

Mr Hills : Part of the standards reduction is the fact that a lot of our capacity to test and comply has disappeared over the years.

Senator KIM CARR: But that's not an excuse for not doing anything. That seems to me to be justifying poor governance. If we haven't got the capacity we should get the capacity to be able to test building products for safety. Would you agree with that?

Mr Hills : Yes.

Senator XENOPHON: I have some questions to put on notice, because we'll run out of time, but the broader issue is that you've talked about the loopholes and noncompliance and fraud. What do we do about these dodgy products that are already in buildings? How do we deal with that issue, if there are many thousands of buildings? I'm not talking just about external cladding, something that you can see, but something that's internally in buildings. How do you deal with that?

Mr Hills : It is a very difficult question to answer. In Victoria, for example, with the cladding audit that was done after the Lacrosse fire the difficulty is that the VBA, as I understand it, cannot punish or chase after people once a building is completed. It's the same with the Queensland Building Codes Board. Their responsibility stops once the building is handed over to the owner. So even if they want to, with their current powers they can't reach out beyond that final construction stage and prosecute. So it's left to the owners to fix the building after they become aware of noncompliance within their building. We believe that is unfair and that there needs to be other mechanisms in place to allow people who put the stuff there in the first place to be prosecuted. Perhaps if fines and punitive measures were levied against those, that would pay for a more robust inspection process.

Mr Attwood : They are the challenges post-build. It is extremely difficult, sometimes, to identify exactly what has taken place during a process. It might be embedded under concrete, inside of walls or in roofs, so it is very difficult on occasion to actually identify what the products are. But the point I would make is that focusing purely and simply on the products themselves is only part of the challenge and part of the problem. It's the total element of systems and installation and also upkeep. So just focusing on the product line itself is not going to address all these problems; it's the totality.

CHAIR: We are over time, but my final question would be: have either of your organisations had much involvement with the federal department of industry looking at this issue? If we are going to adopt a national approach, some of these areas should be of interest to the department of industry. What is your experience there?

Mr Hills : We have had difficulty engaging with the department over the last couple of years because there has been a change of minister on a regular basis, and so our ability to inform the department has been hampered by the fact that there has been a change of—

Senator XENOPHON: What, three ministers in two years?

Mr Hills : Basically, yes.

Senator XENOPHON: No. Three ministers in 15 months.

Mr Hills : Something like that, yes. So it is very difficult for industry to get its consistent message to people when they change. It is the same at the state level. But within that we have tried to make it very clear to them that we need more investment within innovation and we also need more policing, we need training and all those sorts of things.

CHAIR: What are the mechanisms for engagement with the department of industry?

Mr Hills : We talk with them and we try and have meetings with them, but you have a meeting with a minister who may be not there in a month's time.

Mr Attwood : I would mirror that. It is an ad hoc arrangement really in terms of trying to engender an engagement process. People are interested and they want to, but it is an ad hoc arrangement and it very much depends on what the priority of the day is.

CHAIR: Thank you very much for all of that and thank you for appearing before us.