Event: Denita Wawn interview with Laura Jayes, Sky News
Date: Friday, 21 July 2023, 10.30am AEST
Speakers: Laura Jayes, host Sky News; Denita Wawn, CEO Master Builders Australia
Topics: insolvencies, interest rates, industrial relations
Laura Jayes, host Sky News: There are fears tougher times lie ahead in the construction sector. This is after new data from ASIC this week revealed a 91 per cent increase in NSW construction failures. The state accounted for 44 per cent of the construction failures across the country in the last financial year. So, what’s next for the sector? Joining me live now is Master Builders Australia chief executive Denita Wawn. Denita, first of all, on those failures, why?
Denita Wawn, chief executive Master Builders of Australia: It’s a culmination of events, unfortunately where we’ve seen many builders dealing with fixed price contracts signed well and truly before those inflationary increases that we’ve seen in the industry of anywhere between 20 to 30 per cent in the margins just simply could not keep up with those inflationary pressures. And that’s been because of material shortages, labour shortages that have culminated also in supply constraints which means that it takes longer to build and that then puts an impact on cashflow as well. So, significant fragility in the industry and I think it’s reflective of the broader economy as well. Particularly, now where we’ve seen the ATO lift its tax amnesties and that’s really coming to a crunch in some circumstances.
Laura: Why is it so bad in NSW?
Denita: Well, it’s bad everywhere. We’re seeing approximately 70 to 90 per cent across the country in our sector on the year to year data. It is simply because of greater competitive pressures in the larger states where they are working on slim margins and that therefore has a significant impact when you are dealing with unprecedented increases in inflation. And of course, we can’t forget the fact that you’ve had situations upon which we’ve also seen corresponding increases in interest rates which is significantly reduced demand for buildings from private investment. And as such, not only are they dealing with loss-leading contracts at the moment but they are also seeing a significant decline in their forward books and that is a massive cashflow pressure on anyone working in the industry.
Laura: And Denita when we’re talking about the industry, are we talking about across the board, are we talking about small builders, are we talking about big developers that are suffering from these fixed price contracts, inflation etc?
Denita: That’s right. 98 per cent of the building and construction industry are small to medium-sized businesses but the larger businesses have also felt the impacts as well. So we’re seeing across the board the impact on the industry regardless of size. And it certainly brings the focus on how do we alleviate these pressures, how do we spread risk and of course, the importance of having a stable economy so we can see these inflation costs go down and also a stabilisation of interest rate rises as well.
Laura: So, governments of all stripes at the moment are at least talking about the need to get more houses built and quickly. But what are they doing about the industry itself and these failures we’ve seen?
Denita: Well first and foremost the need for the industry is to stop having rollercoaster circumstances of demand and we need a smoothing of building approvals. And that means that provides the industry certainty in terms of employing more people and putting money into business. So, economic strength is critical and we need as a consequence in first and foremost a decline in these inflationary pressures. They are stabilising but they are stubbornly high and that’s what we need to focus our attention on. The other big issue is around regulatory costs to businesses skyrocketing, being open to transition or change and of course, we are worried also about the cost implications of last year’s IR changes and the looming IR changes that are going to be apparently introduced in the next few weeks.
Laura: Yeah, same job, same pay. I saw that is going to be considered by Cabinet. Last time we spoke you said there was not a lot of consultation with the Government. The Government has said they were consulting. So, do you have a new perspective on that? Has anything changed in terms of dealings with the Government and the Minister?
Denita: No. Nothing has changed. All we know at the moment is what is in the public arena and that is a series of consultation papers that took a very broad approach to the issues that were being addressed by the Government. That of course caused more alarm than less and we now await to see what the legislation says. There is growing concern in the industry and the economy at large that this will put extra pressure on to cost of living and cost of doing business.
Laura: Well the Government, Denita, has said, you know this, that your industry is not the industry being targeted here but it doesn’t mean there’s not collateral that bleeds over into other industries. So what are you calling for? A complete carve-out?
Denita: Well we’re saying that if you are taking an approach that is very narrow, then the legislation should be correspondingly very narrow. What concerned us and other employer organisations is that the discussion papers released by the Government took a blanket approach to a narrow problem. And that blanket approach was proposing amongst other things to cover independent contractors in our sector and that means that would impact 260,000 businesses in this country. So we’ve simply said don’t take a blanket approach. Take a narrow approach. Put in what you intended, what you’re saying and we hope that they are listening to us to ensure that the narrow approach is taken. But certainly, the consultation papers that were released for the consideration took a very broad approach and that is why so many of the employer organisations are very concerned and alarmed. And we will stay alarmed until such time as we see the legislation, review that and then consider our position accordingly.
Laura: Okay, Denita thanks so much. We’ll talk soon.
Denita: Thank you.
National Director, Media & Public Affairs
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