SOS: Why the Albanese government must help SMEs, $360bn construction sector

This week’s jobs and incomes “summit” is taking place in the middle of a deep crisis among the 350,000 small and medium businesses plus the 1.2 million Australians they employ in the $360bn construction sector.

Yet their plight is close to being ignored by the so-called “summit”. In what appears to be a breach of integrity in government, the carefully prepared pre-election ALP policy to address the issues appears to have been mothballed.

Capturing the headlines, the ACTU has done an enterprise bargaining deal with the so-called Council of Small Business Organisations which represents just over 40 separate bodies, but none of those bodies are the involved in the building and construction sector.

Almost in frustration, the unrepresented bodies representing family business in plumbing, electrical, communication, fire, refrigeration, air conditioning and similar industries have come together to plead with the government to honour its election campaign promise to address the crisis.

The closest the industry will get to be represented at the “summit” will be via the Electrical Trades Union which, to its credit, is backing the industry to demand that the government, as a priority, honour it promises to the building industry.

The ALP promise was clear, “Labor is committed to protecting the rights for small business, including ensuring security of payment in the building and construction industry”.

The recommendations in Review of Security of Payment Laws: Building Trust and Harmony, prepared by John Murray in 2017, including in relation to the implementation of statutory trusts, must be implemented immediately.”

The Electrical Trades Union knows that, like the family businesses involved, its members are in grave danger because money is being syphoned into the building organisations who are teetering on the brink of collapse.

The union will tell any ALP government people prepared to listen at the summit: “Implementing the Murray Report is fundamental to driving cultural change in our sector. Too many workers and subbies are being left in limbo through no fault of their own. Delivering security of payments will simply create a better, fairer industry where subbies can rely on the commitments made to them and employees can have certainty that their job will be there tomorrow.”

But despite its influence it's doubtful whether the electrical union can gain the attention of the “summit” to the looming building crisis even though it threatens to swamp many of the current debating topics being discussed.

Prior to gaining government, the ALP listened carefully to the small enterprises in the building and construction business. Even before the current crisis, the ALP discovered that money being paid to major contractors did not always flow down to the small operators.

In more recent times diversion of money has become much worse which is why the enlightened ALP policymakers who set out the policy declared the so-called Murray solution “must be implemented immediately”.

Murray proposed that when an owner pays a building construction company for work done it should be put into trust and then allocated fairly to those who have performed the work. Instead of paying contractors, building and construction companies are often using this money for their own working capital.

To be fair to the new government, it is planning to introduce the unfair contracts legislation that was prepared by the previous government but put on hold partly because of high pressure from lobbying from the large builders. I suspect the same groups are now lobbying the ALP ministers to mothball ALP payments policy. So far the lobbyists have succeeded.

On unfair contracts legislation, the contractors and the electrical union want that legislation to be taken a step further to counter specific practices that have developed in building and construction to delay payments.

The Australian Building and Construction Commission, which under ALP policy will be abolished, did its best to help small contractors be paid, but it was hamstrung by the limitations of each state act. The unions and the contractors want a uniform policy around the nation, in accordance with ALP policy.

If the government diverts its efforts into areas that grab bigger headlines then, as the rate of business failures accelerates, the inevitable casualties among smaller contractors and their staff will multiply.

A frustrated chief executive of National Electrical and Communications Association, Oliver Judd says: “Our subcontractors are in crisis. Subbies are taking on a disproportionate amount of risk on construction projects, but many of the measures to mitigate these risks are outside of their control.

“Hardworking family-owned companies are sick of being ripped off by unscrupulous or incompetent construction companies that don’t know how to run their own business and impose unfair contract terms and payment practices to use the bank accounts of tradies to bankroll their mistakes. Tradies have to be protected.

“Previous Commonwealth Governments have let the mixed bag of security of payment laws continue. This government committed to implementing policy reform immediately, and with the storm clouds surrounding our sector it has to be done now before more honest tradies lose their livelihoods and their homes.”