Federal, state ministers strike deal on building reforms

The government has thrashed out a deal with the states to introduce tougher regulation of the nation’s construction industry.

Federal Industry Minister Karen Andrews.

The Morrison government says it has thrashed out a deal with the states to introduce tougher regulation of the nation’s construction industry, paving the way for the possible resolution of a crisis in insurance coverage.

Industry Minister Karen Andrews said today the government had reached an agreement with her state counterparts to implement recommendations of the Shergold-Weir report on the state of the building industry.

The most critical recommendations of the report co-authored by the former top Howard government bureaucrat were to improve compliance with approved building materials, site documentation and rectify all buildings identified to have combustible cladding.

Ms Andrews confirmed an agreement had been reached prior to a meeting in Sydney with state building ministers.

Insurers, who have refused to renew indemnity policies for many building certifiers or significantly increases premiums because of a flood of claims, said they welcomed an agreement.

But their support would depend on the speed with which the agreement could take effect with all recommendations put in place.

Pleasantly surprised: Industry reacts to deal

Master Builders Australia chief executive Denita Wawn said she was “pleasantly surprised” that federal and state governments had heard the concerns of the construction industry after previous disagreement, coming to today’s meeting with a new-found willingness for a

Co-ordinated national approach.

Ms Wawn told The Australian that a full implementation of the Shergold-Weir report would provide a “safety net” for the industry after it had experienced too many gaps in regulation, compliance and a lack of enforcement.

She said: “This was an important step for ensuring confidence back into the system. We had asked for more co-operation, more cohesion, and they have delivered that.”

Property Council chief Ken Morrison said the federal government and states had “stepped up” to deal with the problem.

“They put aside their state-by-state parochialism and agreed to pursue these issues on a national basis,” he said.

“We really welcome that. It was what was needed, what we asked for all week. There’s a lot of work to do, particularly around cladding, and around insurance, so this won’t get solved overnight.”

Mr Morrison said it was critical that the issues were co-ordinated nationally — as the ministers had agreed.

A good start: Insurers

Insurance Council of Australia chief Rob Whelan described the deal as a “good start” to restoring confidence in the construction industry, but he indicated a return to normal for insurers offering indemnity protection to building professionals by offering lower premiums and excess payments could take time.

Mr Whelan said he was pleased that a national approach to a complex problem would be adopted. Insurers could respond when confidence was restored — which would involve calculating risk levels if compliance with building and product quality was improved.

The key issues, Mr Whelan said, were transparency, accountability and full implementation of the Shergold-Weir report.

Asked if building certifiers could hold out hope that their insurance premiums and excess payments could return to previously lower levels, the insurance industry chief said: “This is about being able to monitor the future environment — that we don’t get the sorts of

concerns that we’ve had with the current environment.

“And that’s about ensuring there is appropriate risk mitigation, that action is taken in the field to ensure construction is done appropriately, and surveyed appropriately.

“So in those circumstances, if these initiatives are implemented in a consistent fashion, then yes, the insurance industry will be able to respond accordingly and the market will normalise. At the moment it is not a normalised situation.”

Cladding tipping point

A crisis in the construction industry has been coming for some years related to inconsistent compliance from state to state with building standards and the frequent use of imported, substandard building materials, usually to save costs.

Insurers say the tipping point was the much higher risk for future claims they faced following the discovery — in the wake of London’s fatal Grenfell Tower fire — that dangerous combustible cladding was commonly used on buildings in Australia.

In the past six months, uncertainty over standards and insurance coverage has intensified with

increased reports of structural problems such as cracks found in recently built apartment blocks.

With insurance companies responding by pushing up premiums to unaffordable levels or refusing to renew policies for certifiers who need coverage as a condition of their licenses, many building professionals were complaining that the system had become unmanageable

and their only option was to leave the industry.

Building certifiers approved for indemnity insurance this financial year have faced

premium increases of 300 per cent or more.

The Australian understands that Ms Andrews and state ministers agreed to put aside differences and commit to a national approach at a group dinner last night ahead of today’s building industry ministers’ forum, held at the Sheraton on the Park Hotel in Sydney.

Earlier this week, state ministers rejected a proposal by Ms Andrews for a national taskforce to oversee uniform reforms.

But last night’s pre-meeting discussions settled on a national action “team” of industry specialists that would co-ordinate national implementation of the Shergold-Weir recommendations, and report to ministers in progress.

The timetable for improved compliance and any national funding needed to fix the most immediate problem — the replacement of flammable cladding — is still to be settled and confined by the ministerial group.

After outlining their deal to industry representatives today, ministers met behind closed doors to work out more detail.

States warned cladding their problem

Earlier Ms Andrews warned states not to shirk responsibility for fixing millions of dollars worth of flammable cladding and other defects, citing the billions in revenue they have received from the construction boom over the past decade.

The warning came ahead of today’s emergency meeting of building ministers as Ms Andrews ramped up her opposition to any push by states for the commonwealth to provide funding to fix buildings.

The ministers will also discuss the inability of construction certifiers to obtain insurance, following several cladding-fuelled fires in Melbourne apartment buildings and structural faults that have caused the evacuation of a number of buildings in Sydney.

On Tuesday, Victoria’s Andrews Labor government announced a $600 million cladding rectification package, but pressured the Morrison government to fund half of it.

Victorian Planning Minister Richard Wynne argued yesterday that it was “only fair” for the federal government to contribute $300m.

His Coalition counterpart, Tim Smith, accused him of trying to absolve Victoria of responsibility after Mr Wynne unsuccessfully asked him to sign a bipartisan letter­ to Ms Andrews calling for a “nationally led” solution.

Ms Andrews said the states had the capacity to ensure the safety of their own buildings.

Victoria’s stamp duty revenue from property grew to more than $7 billion in the 2018-19 state budget, doubling over the past decade, with overall property taxes repres­enting approximately 17 per cent of total state revenue.

“States have been big beneficiaries of the building and construction boom over the past decade,” Ms Andrews told The Australian. “Now is not the time for them to shirk their responsibilities.”

But Labor’s industry spokesman Brendan O’Connor turned the accusation against the Mor­rison government, saying it had been “shirking responsibility” by refusing to provide funding for rectification works and failing to address the inability of building surveyors to obtain insurance.

“Each day the Morrison government fails to take leadership and respond to the building industry crisis, businesses are closing down, the safety and lives of Australians are put at risk,” Mr O’Connor said. “The regulatory and enforcement regime is broken, and leadership on this issue is needed to improve compliance with the national construction code and toughen up penalties.”

Ms Andrews said today’s meeting was a chance for the states and territories “to demonstrate once and for all that they are committed to working together to ensure a nationally consistent building sector”.

“I will again offer to fund a taskforce that will work with the states and territories so they can implement the recommendations of the Building Confidence ­report,” Ms Andrews said.

The letter from Mr Wynne, circulated to Mr Smith last month and obtained by The Australian, says “state protections can only go so far”, calling for a “nationally led solution”. It asks the commonwealth to “help support those Australians caught up in this crisis through no fault of their own”.

“As representatives at a state and national level, we are all responsible for giving people more faith in the building system. Even more importantly, it’s up to us to help keep people safe,” it says.

Mr Smith told The Australian: “The letter is littered with political points trying to absolve the Andrew­s government of any responsibi­lity for a mess they’ve created, and I refused to sign it.

“It was clearly designed as a political manoeuvre to wedge me and the federal government.”

Mr Smith said there was a role for the federal government in regul­ating the building industry nationally. “But the federal governme­nt’s role is not to bail out state governments, particularly this state Labor government here in Victoria,” he said.