Building watchdog muzzling ‘cost the economy a $14bn hit’

The national economy has suffered a hit of up to $3.88bn a year from rising disruption to building sites.

The national economy has suffered a hit of up to $3.88 billion a year from rising disruption to building sites and unlawful industrial action in the construction sector since the abolition of the Howard-era building industry watchdog nearly four years ago, analysis shows.

The Gillard Labor government’s decision to scrap the Australian Building and Construction Commission in May 2012 has cost households ­between $777 million and $3.88bn a year, or up to $13.9bn in total to last December, the research says.

Master Builders Australia, the industry lobby group backing the Turnbull government’s efforts to reinstate the ABCC, produced the analysis and based its finding of damage to the economy on 2014 modelling by Inde­pendent Economics, which cal­culated economic benefits from construction industry productivity.

The MBA concluded productivity gains in the construction industry of between 1 per cent and 5 per cent were likely to have been forgone since the ABCC’s abolition — this translates to an average drop in household welfare of $2.3bn a year.

The fresh analysis, produced by MBA for internal purposes and obtained by The Weekend Australian, was a “very conservative” ­estimate of the benefits and costs to construction productivity flowing from industrial relations ­reforms, the group’s chief executive, Wilhelm Harnisch, said.

In building its case to resurrect the ABCC, the Coalition has used Australian Bureau of Statistics data to show that bringing back the industry watchdog — which is more powerful than the present industry regulator, the Fair Work Building Industry Inspectorate — would yield a 20 per cent rise in productivity.

Earlier Independent Econ­omics research suggested a $7bn-a-year benefit to economic growth would accompany the ­return of the watchdog.

In its public infrastructure ­report of May 2014, the Productivity Commission considered the $7bn figure but concluded the ABCC and its predecessor, the Building Industry Taskforce, ­“improved productivity, but not to the degree that they could be statistically discovered with any precision in aggregate data for the entire construction industry”.

The commission said it had a “mixed” view on the watchdog’s economic benefits, including that Independent Economics’ “quantitative results” were not “credible evidence (that the) ... removal of the ABCC has had material ­aggregate effects”.

However, MBA argues it was “reasonable to conclude” a drop in productivity of between 1 per cent and 5 per cent followed the abolition of the ABCC, taking into account days lost to industrial disputes.

The MBA cited higher costs on construction projects arising from industrial disputes with the Construction Forestry Mining and Energy Union, including the Brisbane Children’s Hospital and Grocon Lonsdale Street development in Melbourne.

Strikes rose 34 per cent from May 2012 to last December, after Labor replaced the ABCC with the Fair Work Building Industry Inspectorate, which had considerably weaker powers, according to a federal government analysis based on ABS data.

“Given the latest ABS data set about the days lost, we can reasonably conclude that productivity is likely to have fallen,” Mr Harnisch said.