Building costs 'hurt everyone'

VICTORIAN Premier Ted Baillieu wants a national review on the soaring costs of construction.

Victorian Premier Ted Baillieu wants states to influence the national agenda at next month's COAG meeting. Picture: Stuart Mcevoy

VICTORIAN Premier Ted Baillieu wants a national review on the soaring costs of construction, saying it is one of the key issues he will champion at his first COAG meeting next month.

In an exclusive interview with The Weekend Australian after almost two months in office, Mr Baillieu said the increasing costs of building had an adverse impact on both governments and home owners, and needed to be addressed.

He wanted research on comparative building costs, and discussion about how to reduce prices.

"Labor governments at a federal and state level have been silent for years on the high cost of construction in high-density developments and the industrial framework which applies," he said.

"Reducing the cost of construction will require a new relationship between the industry, unions and government - a genuine attempt to address unnecessary cost imposts and unravel the complex constraints."

The Premier cited the former Victorian Labor government's controversial desalination plant as an example of a "very expensive project" that would cost taxpayers for decades to come.

"Spending on infrastructure and the productivity of that is important (to the economy)," he said, "but the costs of infrastructure are escalating.

"The cost of construction is escalating very fast. The problem is, if it escalates too quickly you price yourself out of future infrastructure."

Mr Baillieu also said government stimulus packages such as the Building the Education Revolution scheme and now the flood levy affected the increasing costs of infrastructure as they tended to attract large contractors who undercut local labourers.

"In the reconstruction phase there is going to be intense focus on areas of Victoria and Queensland. That's likely to lead to high costs," he said.

"What we have been saying is that we must not repeat mistakes: the gains of post-bushfire reconstruction in Victoria were undermined by contractors coming in from outside."

Mr Baillieu said the federal government should ensure its funding did not go to big contractors. "It should be a case of local people making local decisions about local projects . . . with government funding supporting local economies," he said.

The new Liberal Premier said his first task at the Council of Australian Government meeting on February 14 was to get topics on the table. "Getting these things on the agenda is part of the issue because the states haven't been able to influence the agenda," he said.

In a wide-ranging interview, Mr Baillieu said he was happy about how his cabinet had handled the first seven weeks of its term - a period dominated by work on the flood disaster.

He also said he had no problems working with Police Chief Commissioner Simon Overland, with whom the Coalition had butted heads while in opposition, saying the official would see out the remaining two years of his five-year contract.

"You are characterising (the relationship) as tense; I wouldn't characterise that way at all. We had a good relationship," he said. "I have had multiple meetings with the chief commissioner since the election and he's been professional and constructive, and there is no issue."