Event: Denita Wawn interview with Thomas Oriti, ABC NewsRadio
Date: Tuesday, 18 July 2023, 9.15am AEST
Speakers: Thomas Oriti, host ABC NewsRadio; Denita Wawn, CEO Master Builders Australia
Topics: Four Corners, building and construction industry, insolvencies, security of payments, ASIC
Thomas Oriti, host ABC NewsRadio: As Australia grapples with a dire housing supply, those involved in construction are facing their own challenges. It’s an industry plagued by supply chain issues that have caused an unprecedented number of companies to go into insolvency in the past year. You might have heard on the program around this time yesterday morning our discussion with Four Corners reporter Stephen Long. The ABC’s Four Corners program revealed there’s also an underbelly of unethical practices among some of the country’s largest construction groups that’s leaving contractors unpaid for their labour and families with half-built homes. To unpack the struggles facing the housing industry, we’re joined now by the CEO of Master Builders Australia Denita Wawn. Morning to you, Denita.
Denita Wawn, chief executive Master Builders of Australia: Good morning.
Thomas: Quite sobering to read some of that yesterday and see Four Corners. I mean these issues with the construction industry. What’s driving them and are we through the worst of it?
Denita: Yeah, it’s been really quite challenging, that’s an understatement for the industry over the last couple of years. We’ve had a situation upon which building was used as an economic driver to get through the worst of the economic downturn of COVID. That happened worldwide and so what we then saw was a massive reduction in supply of materials and then supply of labour which all drove up costs. We were expecting an increase in costs but not of the magnitude that we’ve seen of anywhere between 20-30 per cent. That was identified in the program last night. So, the builders have been dealing with far greater increases in costs, supply of labour shortage which has meant that progress is delayed significantly which then has an impact in terms of cashflow management. And we’ve seen as a consequence many businesses become insolvent. More than over average. But we do think that we’ve probably seen the worst of it. And I think the positive news out of that difficulty is despite all of those challenges, we’ve actually also seen a large number of new businesses come through of new people entering into the industry. It is a fragile industry. It is an industry that operates on low margins and as a consequence, there’s got to be some pretty robust management to ensure you stay on the positive side of the equation.
Thomas: Yeah, a lot of things to unpack there. Just with the insolvencies though, Denita Wawn, who is that’s been hit the most by these insolvencies? Who’s seeing the worst consequences?
Denita: Well, it’s been across the board from whether it’s small, medium or large businesses that then, unfortunately, has a downward impact in terms of the employees, the subcontractors, clients and of course the builders and their families themselves. We have to remember that 98 per cent of the building businesses in this country are small to medium-sized businesses. They are family-run businesses. And so, it really has an impact throughout the economy when we see these unfortunate circumstances of insolvencies. And that is why we’ve been very focused for a long period of time on minimising the risks of those occurring but the challenges that we’ve faced over the last 18 months really have been unexpected and as such we’ve seen this unfortunate increase in insolvencies that we’re hoping will start to turning downwards over the next six months.
Thomas: As you say, hopefully, we’ve seen the worst of it. Four Corners featured a property development company that allegedly ripped suppliers off, didn’t pay the contractors, built up huge amounts of unpaid taxes as well. But how prevalent is that kind of behaviour in the industry?
Denita: Well, we say just like any other industry in the economy there are rogue operators. And that those rogue operators who do the wrong thing intentionally should be held to account whether it’s running a business, phoenixing, intentionally operating while insolvent. They should be held to account by the regulators just as we say that if people are deliberately flouting the law when it comes to building quality, building compliance, they too should be felt the full force of the law. We believe in both instances that there have not been enough resources put forward by the regulators to hold those to account. They give the industry a bad name and they also make it difficult for the reputable businesses who are trying to do the right thing but, in many instances, will be undercut by those operators. So, we know as with any other industry we’ve got to clean up the industry, but we don’t think it’s as extreme as what was implied by some on the program last night.
Thomas: When it comes to regulatory teeth I guess, what do you want to see regulators like ASIC do to protect people who are building homes or as you say contractors who fear they might not get paid for their labour?
Denita: Well, we have a series of laws in respect to fair trading. ASIC has got significant laws that have been supported by director identification numbers that we’ve been supporting. We want them to spend more time on ensuring people are doing the right thing and if they are not then prosecution is undertaken by those regulators. We also believe that there needs to be greater uniformity of the security of payment laws in this country. It has been a recommendation that we look at uniformity. It is state law that we focus on that security of payment. But security of payment is when problems happen. We want to ensure that we focus on problems not happening in the first place. And this is around greater education, more focus on mandatory, compulsory personal development, professional development through the industry. It’s also about making sure that we have better supply chains and there’s better risk management and sharing of risk through the supply chain as well. So there’s a series of policy initiatives but equally, it is up to the industry itself to hold those who are doing the wrong thing to account.
Thomas: Denita Wawn, thank you for joining us. Appreciate your time.
Denita: Pleasure, thank you.
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