Malcolm Turnbull and Michaelia Cash have boasted that the long-awaited passage of the Government’s ABCC bills is a ‘fundamental economic reform.’
How disingenuous. Last minute amendments made at the behest of Senator Derryn Hinch and backed by money hungry big builders rendered toothless the legislations most critical element – the revised Commonwealth Building Code.
It’s fashionable to heap scorn on the diseased culture of rent seeking that pervades large quarters of the union movement. But from the standpoint of longsuffering Australian taxpayers who pay the most expensive infrastructure costs in the world, the fact that more than a quarter of the CFMEU’s workforce are facing conviction for over 1000 industrial breaches is more of academic than practical interest.
The real issue are enterprise bargaining agreements that jack up costs, drive down productivity and fatten corporate bottom lines.
The Building Code addressed this directly by banning a laundry list of these anticompetitive and restrictive deals from any employment agreement for projects taking a cent of Commonwealth money. In the bills original form, terms like unrestricted union right of entry, compulsory hiring of non-working union delegates on company money, bans on labour hire schemes and free reign to call union ‘toolbox meetings’ as a form of legally sanctioned industrial action would be banned from government projects.
Critically, this meant that contractors seeking a share of the Commonwealth’s $55 billion infrastructure budget would be unable to tender if they entered into employment agreements non-compliant with the Code.
But under the last minute change, contractors who have signed non-compliant pay agreements will now have until 2018 before having to comply with the Code.
At a glance, Hinch’s reasons for pushing the amendment make some sense – if the Code came into immediate effect, it would have unfairly locked out around 1500 contractors with agreements that don’t pass muster from Government work.
The problem is that the Code was publicly released more than two years since ago when the Government announced its intention to bring it into law. Not only were these builders either aware of the code or wilfully ignorant; many of them, including Lendlease – one of the Government’s two largest building contractors – signed their union friendly deals following the Federal Election called on the express basis of passing the ABCC.
The idea that forcing these builders to live with the consequences of giving in to union deals that take taxpayers for mugs after the election was won is ‘retrospective’ is a mealy-mouthed fiction.
In truth, it would have sent an indelibly clear signal that taxpayers – not corporate profits or union power – would now be treated as the clients of infrastructure spending.
Lendlease’s recent four year enterprise agreement – signed while the ABCC was front and centre of the Government’s agenda – is a working example of how deep these rorts run.
Under the agreement, a New South Wales worker on a major building project with a trade qualification and a range of basic onsite will enjoy a weekly pay packet worth $2152.05 as of January 1 2016. Thanks to the agreement’s four locked in yearly 5 per cent pay rises, that same employee will net a staggering $2437.23 a week by 2020.
Compared to most workers who receive yearly increases of 1 to 1.5 – or small business owners who enjoy no guaranteed wage rises at all – the deal brings into sharp focus the divide between the rivers of gold enjoyed by a small segment construction workers, and the rest who workforce who foots the bill.
In the first year alone, the agreement will see tradies working on major building sites earning around 75 percent more than a police constable and over two thirds above a public school teacher with five years’ experience. By 2020, those same workers will be earning around double an experienced public hospital nurse. The deal also includes a sizable share of the restrictive terms banned by the Code with a history of proving fertile ground for industrial chaos and thwarting productivity. Perhaps worst, the agreement contained the now banned ‘jump up’ clause, ensuring all subcontractors to be employed on Lendlease sites will have their wages and conditions fixed before the first brick is laid – wholly eliminating competition among prospective contractors.
Thanks to the Hinch amendment, Lendlease will now use that enterprise agreement on the $9 billion worth of Government work it now has in the offing.
The key to understanding how these deals come about is that in big building projects, the usual rules of market competition are suspended. There are only a few firms with the heft to tender for government work and most are subject to basically identical pay agreements that sit substantially above what competition generates in mid-level and residential construction. With these head contractors earnings usually a fixed percentage of the overall costs, building companies themselves reap benefits by eschewing competition and signing these eye-wateringly expensive agreements.
This culture of informal price-fixing is in large measure made possible by the timed tested truism that government’s hip pocket is not nearly as price sensitive as ordinary consumers.
I’ll hazard a guess and say the CFMEU was deliberately urging these billion dollar construction giants to sign non-compliant enterprise agreements to force the exact kind of compromise that came to pass. The tell-tale sign is the four year timeline of the Lendlease agreement, set to expire one year into what they surely hope will be a newly minted Labor Government. Thanks to Hinch, the Senate, and the government’s fecklessness, they succeeded admirably.
Most ordinary people contemplating an extension for their family home would seek out the best value for money from a range of providers who would vie for their business by competing on quality and price. Why should government acting as a surrogate for taxpayers behave any differently?
Much of the Senate crossbench including Derryn Hinch was elected on a platform of breaking ranks with the Canberra swamp and standing up for the interests of ordinary, hardworking Australians.
By putting corporate interests, union fiefdoms before the Australian taxpayer, he has done precisely the opposite.
John Slater is Executive Director of the HR Nicholls Society