PM, Burke risk credibility ditching building watchdog

Industrial Relations Minister Tony Burke’s announcement that as of Tuesday, the Australian Building and Construction Commission’s powers would be “pulled back to the bare legal minimum” was no surprise. Egged on by the militant CFMEU and other unions, abolishing the ABCC was a Labor Party election promise. But it is bad policy, especially in current economic conditions. The decision, potentially, is a negative turning point for the Albanese government’s economic reputation. It has sparked the first significant backlash from business and employers. For good reason, they warn of delays and cost increases on infrastructure and commercial projects, as well as the revival of union bullying and intimidation on worksites. Business Council chief executive Jennifer Westacott said while the move was an election promise, “it can’t allow a toxic culture of bullying and harassment to take hold in the sector, sap productivity and drive up costs even further’’.

Amid rising inflation and the Reserve Bank imposing higher interest rates to counter it, Labor’s approach carries a risk for the economy and for the government. A surge in working days lost, delays and building costs on public infrastructure and private construction projects would be a serious black mark against the government. Taxpayers would pay billions of dollars more for health, defence, aged care and transport infrastructure. The building industry has calculated that costs could rise by as much as 30 per cent. Higher costs to business for new retail, office and commercial facilities would be passed on to consumers through higher prices.

Unions have opposed the building industry watchdog since the Howard government established it in 2002. The Gillard government abolished it a decade later and the Coalition re-established it in 2016. After the ABCC was scrapped by Labor in 2012, the adverse impact was clear. Working days lost rose from 24,000 in 2011-12 to 89,000 in 2012-13. Since the ABCC was re-established by the Coalition in December 2016, it has proved effective at tackling union excesses head-on. The ABCC has been successful in 80 of 88 cases resolved against the CFMEU, with the courts awarding $14.7m in penalties against the union and its representatives. Working days lost because of industrial disputes in the industry have more than halved since 2016. In view of the effectiveness of the ABCC, it will be incumbent on the government to ensure the Commission’s most important functions are picked up by another agency.

Mr Burke’s comment taxpayers’ money would no longer be spent “determining what sticker someone is allowed to put on their helmet, whether or not a safety sign has to be pulled down because it’s got a union logo in the bottom corner or what flag might be flying in a building site” was needlessly trivial. As Master Builders Australia chief executive Denita Wawn says, the construction industry requires industry-specific regulation and oversight. Modelling by EY had found that scrapping a specialist construction regulator would drive inflation and result in a reduction in economic activity by $47.5bn by 2030, she warned.

Making changes to the industrial relations system was one of the strongest economic levers any government has at its disposal. At a time when government action should be geared to fighting inflation, protecting growth and boosting productivity, leaving the construction sector without a specialist regulator “will fail this test”, Ms Wawn said. Mr Burke’s move, on the eve of the government’s first week of parliament, coincides with ABS inflation data due on Wednesday. It is expected to show inflation accelerating to its fastest pace since 1990. Economists expect that outcome would prompt the Reserve Bank to lift the cash rate for a third consecutive month at its next board meeting on August 2. Regulation of the building sector through the ABCC has worked. This is no time to abandon a successful policy.