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Event: Select Committee Inquiry into Cost of Living, Gladstone QLD
Date: 19 February 2024, 12.00pm AEST
Speakers: Denita Wawn, CEO Master Builders Australia; Dee Zegarac, National Director Media and Public Affairs Master Builders Australia; Robert McCosker, Director McCosker Contracting; Stephen Young, Executive Director and Managing Director Corfields Electrical; Senator Jane Hume; Senator Penny Allman-Payne; Senator Matthew Canavan; Senator Karen Grogan
Topics: building and construction; inflation; labour shortages; housing; land supply; regulation; industrial relations
E&OE
Senator Jane Hume, Committee Chair: I welcome representatives from Master Builders Australia, from McCosker Contracting and, joining us by teleconference, from Corfields Electrical. Thank you all very much for taking the time to speak with the committee today. Information on parliamentary privilege and the protection of witnesses and evidence has been provided to you and is available from the secretariat. Mr McCosker, do you have an opening statement for the committee.
Robert McCosker, Director McCosker Contracting: I’m unaware of how these proceedings go. Is this the three-minute bit?
Chair: If you’ve got three minutes, that would be perfect. But, if you don’t, that’s fine; we can start off with questions.
Mr McCosker: I could give you three hours.
Chair: Three minutes will do perfectly.
Mr McCosker: My opening statement is looking at the broader Australian picture. There’s a quote, I think from Margaret Thatcher, but don’t quote me on that, that said ‘Socialism is a great form of government until you run out of spending other people’s money.’ Now, when you’re talking about cost of living, that is highly relevant. I think it is highly relevant to where we sit as Australians at the moment, with—combined national debt statistics are very difficult to get but it is somewhere in the order of $1.4 trillion, when you include local and state government debt. Let’s put an interest rate of five per cent on that. So we’re talking, let’s say, $50 billion—as a really low figure—worth of interest per annum to the country. We’ve done extremely well and I congratulate the Labor Party for a $20 billion surplus. But that still leaves us $30 billion behind for the year. When we’re talking cost of living, I believe there’s no silver bullet for this at all. It’s actually looking internally at what we do, how we do things. Bureaucracy has gone, in my view, completely out of control in the last, most probably, 10 to 15 years. It’s just got worse and worse. The level of incompetency—I would express it in no other form—is just mind-boggling when you are a businessperson that cannot survive for most probably more than a couple of years if you’re running in the red. And yet bureaucrats can seemingly control the sitting government—and it doesn’t matter what persuasion you are—and just deliver abhorrent outcomes. And that is across our spectrum starting with—one of the things I’m passionate about is education, where we’re at such a low level internationally. If we want to be productive and get our cost of living down, we need people who are educated and educated properly, not down the woke lines that we’re currently pursuing. And so many of the things that we have to eat these days are delivered by unelected people who—none of it has ever been to an election. It doesn’t matter who was in power; no one has ever brought these topics up which absolutely dictate and fundamentally destroy the way we as Australians, which is very evident this year, behave and act. I can specifically respond or make comment with a view to business on the confidence that we have with what can only be described as a complete lack of leadership at any level, in any level of government. When you’re trying to attack cost of living, you can’t just go to the Reserve Bank and say, ‘You’ve got to drop interest rates.’ That’s not the problem. Our interest rates are most probably where they should be. We’ve got an ageing population still. I don’t know statistically, but most probably between 15 and 20 per cent of the population are retired. So they’re relying on those interest rates to actually keep them out of the government purse. So it swings both ways. Interest on a loan on a house in the six per cent range is not ridiculous. We’ve been so used to very low levels of interest that six per cent sounds high. It’s not. I would classify that as normal. I would be happy to pay for that. So, as an opening statement, I believe that government needs to address government itself: how it works, how bureaucrats who—for a lot of them, their outcomes are abysmal and they get promoted, or you promote them out of the road. That’s the standard sort of process that we see, and that applies to everything. I think the level of education, the hospitals, our main roads, our road system is just laughable, and everyone laughs at it, but we’re paying most probably double what they should cost. Any form of government project would be, on average, double to triple the cost if it’s done by normal competent people. And that’s across the board. I could give you 100 examples of that. So that’s where I believe we’ve got to start. There is plenty of money in that pot, but until elected representatives from any persuasion can come in and actually have an effect on the heads of those departments, the road that we’re going down is not going to change. As a final bit—I’m sure my three minutes is getting close—local government is a classic example. Local government has been legislated. The Labor Party did this years ago when they got back into power. The effect that I see is that local government now is merely an arm of state government. There is no such thing as local government anymore. A mayor has the power to do pretty much nothing. The effect of a councillor is effectively nothing. But we pay for them now. In the old days we didn’t even have to pay for them and they made decisions. Now it’s controlled. Any funding they want, if they don’t toe the line, they’re not going to—and a lot of times that’s the political line. If you don’t toe that line, you’re not going to get funding for the things that you need in your local areas. So it’s literally out of control.
Chair: Thank you. I want to acknowledge that Mr Young has joined us on the line. Mr Young, I apologise that we started a bit early. We’re just doing opening statements. I’m going to go to the Master Builders association next and then I’ll come back to you.
Denita Wawn, CEO Master Builders Australia: Thank you, Chair, and thank you, senators, and thank you for the opportunity of getting out of Canberra and enjoying the Gladstone hospitality. Master Builders Australia is the national building and construction industry group, representing all three sectors of the industry: residential, commercial and civil construction. For over 130 years we’ve represented the industry and we hold the largest share of businesses in the economy and contribute to over 10 per cent of GDP. Cost of living is deeply intertwined with the performance of the building and construction industry. We know that when building and construction is strong, the broader economy reaps the rewards. For every $1 invested in our industry, $3 is returned back into our communities. The industry helped keep the economy afloat during the height of the pandemic, proving its resilience and delivering infrastructure and housing projects. And today the industry is being called on again to help get Australians through the housing crisis. Polling has shown that cost of living is the No. 1 concern for Australians and with that cohort, housing is the top issue. Housing costs, whether in the form of rent or mortgage repayments, constitute a substantial portion of household expenditure for the majority of Australians. There has been an overreliance on mortgage holders and renters to do the heavy lifting in our battle against inflation. We now find ourselves in a chicken-and-egg situation as mortgage holders are forced to pass on rising interest rates to their tenants, we are adding to the inflation challenge in the rental market. In 2023, rental inflation rose by 7.3 per cent. On the other end of the housing spectrum the cost of purchasing a new home for owner-occupiers over the same period rose by 5.1 per cent. Both of these are well above the overall inflation rate of 4.1 per cent. From social community housing, rental properties and owner-occupiers, supply is the common constraint, regardless of where we are across the country. Addressing the inadequate supply of housing is paramount and it requires concerted efforts to reduce the cost and time it takes to build new homes. The overall cost of building materials is over 33 per cent higher than before the pandemic and the final cost of building a new home has increased by almost 40 per cent for the same period. We are a signatory to and a strong supporter of the federal government’s Housing Accord and believe the target of 1.2 million homes is not an ambition but a must. We commend recent measures taken by governments to improve housing policy outcomes, such as releasing more land for residential development, establishing the Housing Australia Future Fund and Housing Australia, commencing planning reforms and maintaining important investor incentives like negative gearing and CGT discount. However, there is still much more work to be done to ensure we get the right homes in the right place. With the accord starting from 1 July 2024, we are concerned that there is not enough movement as quickly as possible as we inch towards the starting gun. It is essential that policies are implemented to support businesses and tradies tasked with delivering this goal. Productivity lies at the heart of our industry’s success. Yet we are confronted with challenges such as shortages of tradespeople, high building costs, construction delays and cumbersome and costly regulatory frameworks, and of course the cumulative impact of productivity-sapping industrial relations changes. To address these issues effectively, we continue to advocate measures that enhance productivity, support sustainable practices and streamline regulatory processes. Labour and building material costs are primary drivers of project expenses. While recent data shows a deceleration in building product costs, labour shortages remain a pressing concern. To address these challenges, we have put forth a comprehensive set of policy proposals for consideration in the upcoming federal budget aimed at bolstering our industry’s workforce and supply chain. From improving career education in schools, to promoting greater female participation in the industry, to streamlining migration pathways for skilled workers and enhancing apprenticeship programs, these initiatives are essential for ensuring the long-term viability and affordability of building and construction projects. By implementing the policy recommendations, we can mitigate cost pressures, enhance housing affordability and improve the overall standard of living for all Australians. Thank you, Chair.
Chair: Thank you, Mrs Wawn. Ms Zegarac, you’re happy to not make any additional comments to Mrs Wawn’s opening statement? Thank you. Mr Young, do you have an opening statement for the committee?
Stephen Young Executive Director and Managing Director Corfields Electrical: Yes, I do.
Chair: Thank you—go ahead.
Mr Young: Thank you for inviting me to make a submission to the committee. I apologise for not attending in person. However, I’ve stepped out of a meeting with a number of investment bankers which was scheduled in Adelaide prior to being invited to make this submission. By way of background, I’m the son of a soldier settler. I’m a self-made businessman and the founder, major shareholder and managing director of Tasmea Limited, who now, through its 18 wholly owned subsidiaries, employs more than 1,400 men and women throughout Australia. Those men and women are employed in 18 interdependent businesses, all of whom provide trade skilled services to their customers such as Rio, BHP, Fortescue, Santos and, here in Gladstone, Gladstone Ports, Rio Tinto Yarwun, Cement Australia and Fortescue Future Industries. In Gladstone, I am executive chairman of two of the businesses that Tasmea owns and operates: Corfields Electrical Services and Tasman Rope Access. A number of our other businesses—Tasman Asset Management Services, A Noble and Sons and QMM—also visit Gladstone providing services. I do not feel qualified to speak on Gladstone’s SME challenges, as we’ve only been here as a major player for less than two years. But I thought with some trepidation that I’d speak as an owner and operator of a large number of SME businesses, all of whom operate in regional Australia. With that in mind, I thought rather than highlight policies that impede our capacity to grow, I would share with you about what is important in running an SME successfully, and you may choose to think about the relevance of those business principles to running a country. You may have heard a quote from a legendary management consultant, Peter Drucker, ‘Culture eats strategy for breakfast.’ In our businesses we have learned to develop a strong culture to support our strategy. We have a shared common purpose across all of our 18 subsidiaries, which is delivering value always. This guides the way that our people behave. Quite simply, all of our people understand that if we’re not delivering value to our customers, we’re doing something wrong. I raise this as my first issue, as in my view the Australian Parliament—note that I didn’t say government—has lost its way and the complexity of running the country has got in the way of developing and maintaining a shared common purpose. In my view, that shared common purpose of parliament should be the growing of the economy and in particular enabling the SME private sector, who employ 70 per cent of Australia’s workforce, to grow efficiently and effectively. I see no reason why that common purpose cannot be shared on both sides of the house and in the House of Reps and in the Senate, and the debates could shift to how to improve by achieving that shared common purpose. In short, if we were all working together to build the Australian economy, there would be more available to assist the few who are less privileged. We should focus on growing the pie, not trying to redistribute it. Many of our working tradespeople seek support or guidance from our management and administrative personnel, often at the end of a long shift, say 10 to 12 hours. They’re hot, they’re tired and they certainly don’t want to be mucked around. For a number of years we’ve operated a support office, not a head office, as these individuals need support, not bureaucracy. Our management and administrative teams understand that their role is to help, not impede. As an SME business, or as SME businesses, We receive very little support from Canberra, either from politicians or from public servants that work with them. If collectively we could all agree that creating a growing, efficient, effective private and public sector was our shared purpose, that would revolutionise Australia. We have been and still are a lucky country with an abundance of commodities. But we’re quickly running out of time to create a prosperous future for our grandchildren. I should talk about Tasmea’s values, which involve recruiting for attitude; training, developing, mentoring, inspiring, motivating and rewarding our employees; working safely; building exceptional trade skills; delivering exemplary service; caring for each other, our environment and our communities; and, finally, continuously improving our systems, policies and procedures so as to ensure that we’re more efficient and effective tomorrow than we were yesterday. However, time will not allow that. My simple message is that improving the cost of living is not conceptually difficult. I accept, however, that it is very difficult, if not impossible, if you do not accept the challenge of changing what parliament is trying to achieve. Every new imposition—and currently there is a new imposition placed on SME business nearly every day—is either passed on to our customers or erodes our profits and hence the tax we pay. Either way, these additional costs find their way, either directly or indirectly, into everyone’s cost of living. More importantly, whether these measures are fiscal policy working against monetary policy, environmental laws, climate change policies, immigration laws, changes to employment law or changes to taxation regimes, they all have an impact and they increase the burden on business and, as a consequence, our cost of living. Unfortunately, I doubt that any or most of these measures make Australia more efficient or effective or have the consequence of growing our economy. I will be pleased to answer any questions the committee may have.
Chair: Thank you very much, Mr Young. I will come back to both you and Mr McCosker, specifically because both of you mentioned in your opening statement the frustrations that you have in your respective businesses with increasing red tape and bureaucracy. Now, that is not an uncommon refrain. However, it’s often quite hard to specify exactly what it is that we want to target when we talk about cutting red tape. So I’m going to come back to each of you with the question: if you could cut one thing, if there was one bureaucratic event or imposition, if there was one piece of red tape that you could abolish, what would it be? I won’t ask you right now—have a think about it—because I want to ask Master Builders a couple of questions in the meantime. Thank you very much for your submission and also for the answers to some questions that you took on notice, for which I am very grateful. Before I get on to that, I want to talk about rental property, which is slightly out of your remit but still fundamentally important. You said in your opening statement that landlords are putting up rent. Obviously that’s due to a number of things: demand and supply, pressures of interest rates and other costs. For the benefit of the committee, could you talk about some of those other costs that landlords are facing that are pushing rents up higher?
Mrs Wawn: Certainly the main issue is, of course, interest rates. That’s the predominant one. The other issue, of course, is the capacity upon which they need to ensure that they are getting a return as an investor. Unfortunately when you invest in the housing market, unless you are a government, you’re expecting a return on your investment. And so when you are looking at the cost implications, and it’s depending a little bit on levels of responsibility in terms of the services attached to that rental property, it means that not only are you going to incur additional costs but also the question is about return. And one of the things that we’re very mindful of is that as you have increasing costs, the level of investment in housing, particularly new housing, therefore is in decline. And our view is that governments need to do the heavy lifting on providing homes, particularly from a social and affordable perspective, but equally we can only resolve the stress at the lower end of the market if we actually have more rental homes in the system as it is. As such, we’re highly reliant on investors, whether they are mums and dads or they are institutional investors and everything in between. So our view is that we need to ensure that if you’re going to invest in the new housing market from a rental perspective, you need to decrease costs. A good example of where we’re seeing increasing costs is the cost transfer by governments, particularly local government—but we understand why they’re doing it—of establishing vital infrastructure in new home builds. For example, if you look at brownfield sites, not only are you going to need to build a facility but also you’re going to need to contribute to upgrading existing utility costs. For example, your substation may need upgrading to accommodate 20 homes as opposed to one home if you’re looking at a six-storey unit block. In many instances, that has historically been the responsibility of local government, but that is now passed to developers, and that therefore means that the costs of actually building that property have increased. The list goes on. So there’s a range of issues about whether it’s actually in any investor’s interest to develop brand-new property for the rental market. And of course we would argue that at the moment we think there is a dearth of incentives to actually upgrade existing rental properties, particularly to make them more energy efficient, to reduce costs of energy usage in those facilities. So there are a range of suggestions that we’ve made in our budget submission in relation to existing properties and upgrades to those.
Chair: You provided some data that showed that states and territories are becoming more dependent on property-related taxes rather than less, and that’s obviously very concerning for anybody that would like to see lower property prices. How do you think this might be addressed?
Ms Wawn: All those years ago when GST was introduced, from my recollection, for example, there was an agreement that all the state and territory governments were going to abolish state stamp duty as a consequence of GST. Now, of course, that hasn’t happened. In some states we’re seeing a transfer of stamp duty to land taxes, but because of the increasing cost of housing prices—for example, in my home territory of the ACT there’s exceptionally high stamp duty still paid because of the increase of house prices, while we’ve also seen a significant increase in land rates, and so the combination has made the pricing of homes even more expensive. So as such, there needs to be a serious consideration of the way in which we’re looking at taxation of land, of development of properties and of the prices of homes as well. That is a big issue that we need to address and it’s predominantly at a state and territory level.
Chair: You said in your submission:
In future, financial payments from federal government to the states and territories should be linked to how much progress they achieve in boosting the supply of new housing. In particular, their performance with respect to planning reform, taxes and charges imposed on new home building, transparency, accountability and the improvement of data collection should be taken into account.
Can you elaborate on that? Just explain to me how you think that might work and what kinds of payments you’re specifically referring to.
Mrs Wawn: We’re referring to the National Affordable Housing Agreement. It’s the housing and homelessness agreement that is paid for by the federal government to the states and territories. We say that agreement historically has not had enough carrots and sticks attached to it, particularly in relation to supply constraints by states and territories. We know that the federal government is currently in negotiation to re-establish that agreement and has acknowledged that supply requirements within that agreement are necessary. We’ve been talking about supply issues and the responsibility of states and territories for over 10 years now. We’re of the view that the federal government, consecutive federal governments, have not utilised the financial opportunities they have, whether it’s been through city deals or the housing agreement, to actually put more pressure on the states and territories and hold them to account for the way in which they are spending federal government funding.
Chair: You also said in a response, ‘When supply chains worked reasonably well before the pandemic, it was possible to sequence the delivery of building materials with onsite availability of the necessary labour in a precise way. This meant that the rollout of new home building projects generally proceeded in an orderly, efficient and timely manner. The pandemic broke our industry’s established supply chain. Key products and materials were hard to get, often delayed and came with a much more expensive price tag. And this was exacerbated by shortages of key building tradespeople and other workers.’ That evidence is now getting on a bit, so I’m hoping that you might be able to give us an update on that response and how supply chains are looking currently and what could be done to improve them.
Ms Wawn: I’m sure the gentlemen with us here today will have some good stories, but the macro data is that supply of product has improved significantly but the prices remain high. We’ve seen some decrease. I know from talking to the Forest Products Association last week at the Regional Housing Summit—they were saying that we’ve got good supply of structural timber. But the problem is that we’ve still got supply shortages and we’re seeing increases in prices, particularly in relation to concrete. That’s increased by, I think, something like 50 or 60 per cent beyond 2019 figures. So the materials are not necessarily, with some exceptions, a problem, but the prices remain high. Where we are having significant problems—and this is still meaning that homes are taking longer to complete than others—is with lack of trades. We used to, pre pandemic, build a detached home in about nine months, all things being equal. It blew out to about 15 months during the pandemic. It’s still sitting at about 13 months, and, as a consequence, a house costs more money, because it’s sitting there underutilised and you’re not able to turn things over as quickly. When you do get the trades, they’re more expensive. So that is why we’re seeing an increase in the price of building a home: it is because of those delays and because of the inflated prices of trades. That is the reason why we really heavily want to focus on workforce needs, whether it’s training more Australians, whether it’s retaining our existing workforce—but around skilled migration as well.
Chair: I have lots of questions to ask you about workforce but I’m going to refrain and hope that my colleagues will do it instead. However, I do want to ask you about the current incentives around negative gearing and the CGT discount that you referred to in your submission. You said that they ‘have the effect of dampening rental costs and expanding the supply of rental accommodation and, importantly, they should remain in place’. Are you concerned potentially about changes to those two taxation arrangements? And have you had discussions with government about this at either ministerial or department level? And if you did, how did they go?
Ms Wawn: We haven’t had any current discussions on negative gearing. I think the last time we conducted a large debate around negative gearing was in the lead-up to this 2019 election, when we costed then Labor opposition’s policy on negative gearing and capital gains tax. Our economic modelling showed that if you implemented then ALP policy, we would have seen a decline in about 42,000 homes being built over five years, and a decline in the workforce as well as a consequence. There’s a lot of debate around negative gearing and capital gains. We’re of the view—which is consistent with the Henry review on taxation all those years ago in, I think, about 2008. The Henry taxation review clearly said that you should not change taxation of homes until such time as you resolve supply. If you change any investor parameters, you are going to thwart investment in the industry and therefore thwart supply. So there was always a recommendation from the Henry review onwards that you focus on supply first, get that right, and then look at any taxation changes if there is a view that taxation should be changed. That argument and those fundamental principles of economics have not changed. Don’t withdraw investors out of the market while you’re trying to resolve supply constraints.
Chair: Thank you, Mrs Wawn. Mr McCosker, I’m going to go to you now and return to the question that I asked originally, which was: if you could change one piece of bureaucratic red tape, what would it be?
Mr McCosker: As you mentioned, Chair, I honestly can’t pinpoint one, because, similar to Mr Young, the issues that we face simply get passed on to the clients, which then get passed on. At the end of the day, the person who pays for them is the one right down the bottom of the tree who will end up homeless through all of this stuff. I don’t think we are necessarily disbenefited because of it. We pass the costs on. I think, as per my opening statements, the issues that we face are so broad and so entrenched—and I would again back up Mr Young’s comments that the culture of what we deal with is just so disparaging. It doesn’t matter if we—payroll tax or workers compensation: they’re all just reverting now to taxes and being lost in the system. You just do it.
Chair: It’s an increasing cost of doing business.
Mr McCosker: Yes, exactly. And we pass it on. It’s no different to the debt. If debt is constructive or productive, there’s nothing wrong with debt. But when a government generally or any form of bureaucratic service provides any form of service, it would be easily 200 to 300 per cent greater than what we can do in our world. So—
Chair: I’m going to ask Mr Young whether he has a specific example of a form of bureaucracy or red tape imposition on your business that you know you have to pass on that you would like to see the government unwind.
Mr Young: Senator Hume, I don’t want to detract from a point that I made earlier, which Mr McCosker has emphasised, which is that I’m keen to encourage your committee to encourage parliament to think about what they’re doing and change what they’re doing at the broadest level to reduce the imposition upon SMEs. But, to answer your specific question, I would single out employment and industrial relations law. I’d make first of all an observation. We are good employers. I started in 2,000 with 10 employees. We now have 1,400 employees. So I would argue that we must be doing something right, and one of the things we’re doing right is, I think, that we are good employers. One of the thrusts that are coming out of Canberra currently is that casual employment is bad. I know that may be simplistic, but the reality is that demand for what we do looks a little like the chart you get off a heart monitor. It’s got peaks and troughs. We actually offer continuous employment by lining up the peaks over a number of clients, but we still have troughs. The casual employees that work for us generally have one set of shirts in their home. They just work for us. They work 2,000 hours plus, but they don’t work a fixed shift. They work when we’ve got work and they rest when we’re not working. That doesn’t make them bad employees or us a bad employer. It just is a flexible working arrangement that works for both of us. They’re exceptionally well paid, they’re well looked after, we care for them and they do a terrific job for us. That’s a win-win relationship. And to be perfectly frank, there’s not much room for Canberra in the middle of that relationship. And currently Canberra is seeking to put either bureaucrats or unions or both in the middle of that relationship. If you stay with my original proposition, I don’t know that adds value.
Chair: Thank you, Mr Young. That’s very helpful. Senator Grogan.
Senator Karen Grogan: Thank you, Chair. You asked two of the questions I was particularly going to go to, which were about the federal government financial payments to the states and territories and also unpacking the building cost scenario. But I do have a third question, which is really to Mrs Wawn, about the training pipeline. What do you see as being the critical things that need to occur to ensure that we start to boost that available workforce?
Mrs Wawn: It’s a couple of things. First and foremost, there is the responsibility of industry. The industry needs to be responsible in terms of being a bit like Mr Young: making sure that everyone in the industry is an employer that we wish to work for. We need to ensure that we’re attracting all the potential workforce. We historically have only attracted 50 per cent of the population—males—and as such we need to be more focused on female participation. We at Master Builders are very thankful that we’ve had longstanding funding from the Office for Women around the Women Building Australia program that’s continued now for about five years. That is having some great successes, even off a low base. We need to support our apprentices and our host employers really in two ways. One is around subsidies: ensuring that the subsidies are not just in the first year but are continuous throughout the duration of the apprenticeship. We also need to look at the costs associated for those apprentices in trades as opposed to other types of apprentices. If you look at a carpenter apprentice, he or she is going to different sites. They need a car, they need a large amount of tools and so forth. So it’s a costly exercise as opposed to undertaking other apprenticeships. Finally, we also need flexibility in our apprenticeship. We have stuck to effectively our four-year apprenticeship model for many of our apprentices over a large period of time. While we should not move away from that per se, there should be alternatives and there should be looking at skill sets. For example, if you just want to do formwork, then why can’t you do, say, a two-year training rather than a full carpentry apprenticeship of four years and the like? We certainly will be working with the new councils for skills, and for us it’s BuildSkills Australia. We welcome the support of the establishment of that council as an equal rep model to enable the parties to come and have a look at the flexibilities required to attract our workforce. I think an earlier witness talked about the electrification of the country. Not only do we need more electricians but also when you add on the additional electrical changes, then that’s a significant shift in terms of pure numbers. And we also need a greater focus on vocational education and training. It for too many decades has been considered subpar in comparison to a university career. We strongly disagree with that notion. We need to work collectively with governments to ensure that an apprenticeship is a fantastic opportunity for people in terms of their career progression. There are some phenomenally good stories about opportunities for anyone that starts an apprenticeship. And I’d like to see more schools promoting apprenticeships as opposed to giving precedence to universities.
Senator Grogan: I couldn’t agree more. Thank you; that’s really helpful. I would just make a quick comment to the last gentleman that spoke. I think you should really check out what the reality of the casual conditions in the IR piece are, because if you are a good employer as you say—and I’m absolutely certain you are—then you’ll find that it won’t have any impact on you.
Senator Penny Allman-Payne: Thanks, everyone, for being here today. I will start with Mr McCosker and Mr Young. Mr McCosker, I note from our briefing documents that your company employs over 750 employees. Are they largely based in Gladstone or are they distributed around the country?
Mr McCosker: We wouldn’t have 750—if you want to include subcontractors and everything. We’ve got a direct employment workforce of in the 400 to 500 bracket. We work from—our furthest job is Nhulunbuy up in the Northern Territory and primarily we’re located in central Queensland.
Senator Allman-Payne: In terms of the bulk of the employees being in central Queensland, is the biggest work site Gladstone, or do you have several work sites of similar size?
Mr McCosker: Currently it’s Gladstone. We have little jobs here and there through the mines. It could be a gold mine; it could be a coal mine. It’s spread all over and they’re not necessarily large. We did build the Rookwood Weir in the last four years, which we had a couple of hundred people on.
Senator Allman-Payne: I will focus, then, on the area where you have the largest group of direct employees, which is here. In terms of attraction and retention of staff, has the availability of other services in the community had any impact, or have you experienced any impact on your ability to attract and then retain staff?
Mr McCosker: It’s difficult to define that. I would suspect that the answer is yes. With our actual staff appointments like engineers, those sorts of people, who we now are hiring out of Brisbane, we’ll do FIFO with them because they can dominate us, because that’s the only way we’ll get people to work.
Senator Allman-Payne:When they say that they’ll only do it as FIFO, are they giving reasons for why they don’t want to actually relocate to here?
Mr McCosker: No, it’s never specific. I guess it’s anecdotal. They’ve got access to private education in Brisbane. They’ve actually got a hospital in Brisbane. That whole capital city thing, I think, is a trend that is very difficult for us. And I would add that our turnover rate of staff, which used to be negligible, is now in the 30-odd per cent range. So it is a massive issue for us. A lot of it, I think, is dictated through wages in Brisbane now. If you want to hear some of the specifics of that, the state government in Queensland has effectively advised—not controlled but advise—contractors on large contracts that any works of more than $100 million will be done by the CFMEU, for example. So your labour costs just doubled, more than likely. People in Brisbane can do relatively unskilled work on $250,000 a year. We want to send them to a mine as a skilled worker and pay them $150,000. And so anyone outside capital cities now just struggles, because we have to provide services for those industries so they can survive. Specifically in alumina, where we do a lot of work, the price of aluminium doesn’t go up. It goes up but it goes down. They struggle to survive. So we have to be as competitive as we can, and wages are about the only thing that is flexible or that does move. To add a comment to the question that the chair asked before about one thing, industrial relations I didn’t think was a thing that we could say. But as a business, we have our own agreement with our own staff. We’re one of the very, very, very few companies that are left doing that. We’re at the moment in the process of renewing our workplace agreement with our staff. And I can tell you it is a multi-hundred-thousand-dollar process and it is hampered 100 per cent to the point of insanity by Brisbane. Effectively, the union movement down there does not want you to have an agreement with your staff and they do everything to prevent it.
Senator Allman-Payne: Is McCosker Contracting a publicly listed company?
Mr McCosker: No, private. I’m the owner.
Senator Allman-Payne: Okay. The reason I asked the question about services is that we heard evidence earlier this morning, for example, of people accepting jobs in Gladstone in industry and then not coming, for example, because they can’t access child care, and then withdrawing their requests. And I’ve certainly heard from other industry here that lack of health care, for example, is something that stops people from coming. So I was just interested to know if you’d experienced that.
Mr McCosker: In both of those cases we’ve experienced it, but it’s not the majority. It definitely does have an effect, and I think that comes to the point of how we run as a country altogether as far as decentralisation goes. We’ve attempted that over years. We’ve decentralised to Brisbane, Sydney and Melbourne. That’s what we’ve done as a country. Our services are just second rate.
Senator Allman-Payne: How would you rate the health services here in Gladstone? You’ve lived here a long time?
Mr McCosker: I actually experienced it personally a few months ago. I point the issues always to the bureaucracy, not the frontline people. Once you got through that period into the hospital system, they were awesome. I was literally scared. I went in an ambulance and I was scared to go there. But once I got in, the actual nurses and doctors working there, frontline people, the same as your defence and your police force and teachers—they’re all leaving in droves, not because of pay or because they’re in a little local community like us but because of the management. It’s bureaucracy driven by these ideologues that are unelected and just come up with sheer stupidity and have no ability to manage people. But, inside, I was happy with it. Obviously, if I were pregnant, I wouldn’t have been.
Senator Allman-Payne: That’s not funny. We were on bypass for a year. I guess the point you were making, though, Mr McCosker, is that you were able to access a service here and, unlike many people who access our health services, you didn’t have to be transferred to Rockhampton or Bundaberg.
Mr McCosker: No but we have lots of employees and it’s not anecdotal—that is still a major issue. The hospital definitely needs—it doesn’t need an upgrade; we need management change that allows doctors to come in. I can give you an example.
Senator Allman-Payne: I think the issue, as I understand it, is we don’t have an ICU, and, if you don’t have an ICU, there is no safety net for specialists, and so that’s why doctors aren’t here. I will move on to Mr Young. Mr Young, you said you’ve only been operating out of Gladstone for two years; is that correct?
Mr Young: Two and a half years, I think.
Senator Allman-Payne: Have you experienced any issues with availability of services impacting on your employees?
Mr Young: We lease houses and provide accommodation to our employees for the first three months to enable them to get settled. If you’re a single person, coming into Gladstone and getting accommodation is a challenge. In part that is to compete against what is offered by many, which is fly-in fly-out roles where a person can go into a camp before returning to a capital city, where often they share accommodation with family or friends. So there is a need to get permanent employees accommodation when they first arrive, and we’ve found that the simplest solution. I’m unable to talk confidently about hospitals and education. I’d leave that to Mr McCosker, who’s got a lifetime of experience in and around Gladstone.
Senator Allman-Payne: Thank you. I will go to you, Mrs Wawn. Housing is not my portfolio area, so I’m not as deep in the weeds as some others are. But in terms of Master Builders Australia, are all of your members just builders or are some of them builders and developers?
Mrs Wawn: We have builders and specialist subcontractors as members around the country. There are about 33,000 of them. I’d have to take that question on notice in terms of any percentages; I don’t think I have a percentage. But 99 per cent of our members are small to medium-sized businesses. They’re not large builder-developers. They’re usually members of organisations like the Property Council. But in many instances—and I can recall a conversation with one of our members who was on a panel at the Regional Housing Summit the other week in Canberra. He is a builder but in part he’s also a developer because he used to build spec houses, particularly for the rental market for investors to come in. And it was easier at that time for him to build and then sell on to investors. He cannot do that anymore, simply because of the costs associated with building, developing and then not being able to pass on at a rate that actually makes him a profit of any description at the moment. He’s in Orange. He would at the moment be basically selling at a loss because he would not get the return. So yes, some of our builders are developers but we’re talking about small to medium-sized developers in the concept of spec homes as opposed to large developers.
Senator Allman-Payne: In your submission—I think this is your submission ahead of the budget—you said that more Commonwealth and state and territory government land should be released. I’m interested to know whether you’re aware of how much land is in the hands of developers currently that’s not actually being built on.
Mrs Wawn: No, Senator, I’m not aware of that. We do know that there is an issue around land banking. That is something that is the responsibility of state and territory governments in respect to whether there needs to be a consideration of how you facilitate that land coming into market. Nevertheless—
Senator Allman-Payne: Is that part of your submission?
Mrs Wawn: No, it’s not.
Senator Allman-Payne: I’m interested as to why the submission says government should just release more land versus actually putting into your submission that there needs to be a look at how much land developers are actually land banking for profit.
Mrs Wawn: Well, I think there’s an important issue there. There are two issues really. One is that a developer, by definition, is going in there for a profit, and no-one should be accused of doing the wrong thing if they are going to make a loss on developing land. So at the moment when you look at the prices that we’ve now indicated in terms of increases, a lot of developers will simply say, ‘I can’t get the numbers to stack up and as such I can’t build on that land at the moment.’ Now, there are no doubt some developers that try and price gouge. That is something that would need to be considered. Nevertheless, I think the vast majority of them are simply holding onto land because at the moment they can’t make a return.
Senator Allman-Payne: If that’s the case, how does releasing more land actually help the developer in that situation?
Mrs Wawn: In terms of releasing land, it’s got to be done. Part of the reason why they’re not making a return is that 40 per cent of the cost of a development is on taxes and development charges. And as such, we say that if you change those cost parameters, and particularly it’s around planning restrictions, then you should be able to actually get a return and you should be able to get a—
Senator Allman-Payne: That’s not releasing more land, though, is it? That’s addressing what you’re saying are other costs associated with developments at the moment that councils used to pay and now they’re asking developers to pay.
Mrs Wawn: No, it’s both. If you at the moment are sitting on land that you can’t develop because the costs are too high in terms of your return, you can’t be forced to release that land on the basis that you’re going to make a loss. And as such, we say that we should incentivise developers into releasing land by simply making the capacity for development mean you’re going to make a profit and just make some sum of money. A good example of where you can get win-win situations is whereby you provide incentives for—instead of six storeys you go to eight storeys, but the government could then say ‘Out of those eight storeys, a component of that needs to be affordable housing.’ So you get the returns because you’ve got greater flexibility of planning, but equally you’ve provided an opportunity to give back to the community as well. That’s the type of housing mix and housing investment opportunity we need to be sitting and talking about on a place-based management system to ensure we’re getting the right outcomes for the local community.
Senator Allman-Payne: If the issue is supply and you’re saying that a developer needs to make a profit, which obviously means that the price of a house has to include an amount of profit, would an alternative strategy be for governments to release land on which they build public housing?
Mrs Wawn: In the housing sector, the more we build throughout the entire housing sector the more supply is going to be adequate. As I said in our opening statement, this is not just about the macro numbers. We’ve got to get the right homes in the right places. There is no doubt that we’ve got a significant shortfall of social housing, public housing, in our country. There’s been a dearth of investment by all levels of government in that space. And if you resolve that situation, you’re going to help a lot on the homelessness issues. But the problem is that it doesn’t help throughout the rest of the spectrum. So we would like to see a multi—
Senator Allman-Payne: That’s presuming, though, isn’t it, that housing is only aimed at the very low end of the market as opposed to affordable housing, for example, that teachers or nurses or other social service providers could also access?
Mrs Wawn: Correct. There’s a combination of both social and affordable that we argue can be resolved through a combination of government spending as well as smart planning incentives to enable more affordable housing to be built. There of course is community housing as well, which will see hopefully an uptick when it comes to the Housing Australia Future Fund. But equally we cannot just focus on that side of the spectrum alone. We also need to ensure that we’re incentivising in some form to actually get more investors into the market in terms of that entry-level rental and entry-level first home buyers, because that then relieves pressure on the affordable housing side of the spectrum as well.
Senator Allman-Payne: I’m interested in a comment that you made earlier. You said that at the moment, some people aren’t building rentals because they need a return on their investment, and you said ‘unless you’re the government’. That points to the fact, doesn’t it, that when we’re talking about an investor in property, we’re making a profit off where someone lives?
Mrs Wawn: That’s right. That’s what investing is all about. I would hope that if you invest in something, you’re going to make a profit.
Senator Allman-Payne: But it’s fair to say, then, isn’t it, that one of the reasons that we have high house prices is a combination, yes, of lack of supply, but we also have a situation where we’ve created housing as a commodity which people are using to make a profit?
Mrs Wawn: I think whether you’re an investor or an owner-occupier, your house is one of your significant assets, whether it’s your principal place of residence or an investment, and your expectation is you are not going to lose money out of it, regardless of whether you’re a homeowner or an investor.
Senator Allman-Payne: But the point still is that if you’re a homeowner, you might not want to lose money on it but you’re also not as—if you’re buying a house to live in and stay in, whether you make a profit or not is not such a big deal. What matters is that you’ve got a roof over your head and a stable place to stay. If you’re an investor, the sole goal is to make a profit out of that commodity.
Mrs Wawn: Yes, that’s correct.
Senator Allman-Payne: I might actually leave it there.
Mr Young: Can I enter into this debate?
Chair: Certainly, Mr Young.
Mr Young: I’m not sure who’s asking the questions.
Chair: That’s Senator Allman-Payne.
Mr Young: There is a presumption that profit is bad. There is a lot of evidence—and I’m developing, by the way, in three states in Australia currently, one industrial, two residential. And in each of those circumstances, my plans are impeded by local government bureaucracy. So I’d just like to repeat the comments I made earlier about bureaucracy. But I’m absolutely confident that per square metre, I will build after making a profit at a lower cost than either my state or federal government counterparts. So the notion that profit is bad or profit is impeding development is not the case. And by the way, I’ve served for two decades on a charity that builds homes for homeless people, and that charity, in my view, outperforms the public sector again by a significant margin because of the way that they are organised and the resources are deployed.
Senator Allman-Payne: Thanks for your comment, Mr Young. I might just finish with the observation that decades ago, governments built up to 30 per cent of public housing and we had nowhere near the housing and homelessness crisis that we have now. And every person that has come before us today to give evidence has indicated to us that one of the biggest brakes on productivity and one of the biggest impacts on cost of living is lack of housing.
Senator Matthew Canavan: I want to start by thanking Mr McCosker and Mr Young, because it’s rare that we actually hear from people on the front line—no offence to you, Mrs Wawn or Ms Zegarac. We generally hear from people whose livelihoods are really associated with making or commenting on or criticising policy, but both of you are actually, as I say, on the front lines and have taken time out of your day. I know that you’ve both made points about the costs of government red tape and regulation. You might not be able to answer this, but I was wondering if you could give a ballpark figure for how much that costs you. Say you’re bidding on a particular job, if those regulations and red tape were removed, in percentage terms, what do you think? Is it 5 per cent, 10 per cent, 20 per cent lower your costs would be if there weren’t the unnecessary red tape and regulation you have to deal with? We’ll start with Mr McCosker.
Mr McCosker: Senator Canavan, I can’t do that, because those costs just get passed on. It’s bigger than that. It’s that whole—it’s what you don’t do. At the moment, similar to Mr Young, I’m in a position where I could go and develop or create community ventures unlimited, but I simply won’t do it because you cannot get past next door. It is simply too difficult, too hard mentally to deal with the processes. So it’s not a specific tax as such. It’s just the level of rules around—and it’s everything. It encompasses everything from your driveway to—we’re talking about cost of living on new houses; every new house now in Australia has to be built to suit a disabled person. So you have to have a disabled bathroom. Your halls now have to be a metre wide. Your front door has to be 1,200-millimetres wide. The door into every room has to be 920 millimetres wide. You’re not allowed to have a lip in any house that’s currently built now more than 5 millimetres. Why would anyone with half a brain do that as a law? So the people on the other end—we can pay the red tape bit but it doesn’t go anywhere near touching the real cost of trying to survive in a business these days. I’d come back more to—the industrial relations are most probably the single greatest thing, the freedom to be able to work. I understand. I started with 12 people too. I peaked at 750. We don’t have that many workers by treating people badly. There is nothing in it for an employer to treat an employee badly. Employers are still out there and do it, but rarely are they ever attacked. The ones that actually do it correctly will be the ones that pay the price.
Senator Matthew Canavan: Thanks, Mr McCosker. Mr Young?
Mr Young: My guess is that it’s 10 per cent or more. I don’t want to, however, miss the fundamental cornerstone of my presentation. It is actually about parliament deciding what it is that they’re looking to achieve. We just had an interesting debate about whether public housing is cheaper or more expensive than private-sector housing. It’s an interesting debate. It’s a debate worth having. But ultimately in the event that you provide the appropriate support for private-sector housing, you’ll get it running and running freely. But currently it is impeded. And those impositions, whether it be medium density, six storey rather than eight, whether it be disabled housing or the degree to which it’s got to be affordable—all of these things can be dealt with in order to achieve an outcome. But the outcome, I take it, is improving the supply. So if you start with the right question, you get the right answer. I have to say, from where I sit, I don’t see parliament—note, I didn’t say government—deciding that they need to increase the supply and then not losing focus on that objective. It very quickly gets into all sorts of other issues and you get tied up. If you have a single focus on trying to achieve an outcome, generally speaking you can achieve it. That’s why Mr McCosker now has got 700 employees. He’s known what he’s been doing for every day that he’s been in business, and he’s not lost focus. It’s the same, hopefully, with our business. Some years it’s been super tough, but we’ve never lost focus.
Senator Matthew Canavan: I probably only have time for two more questions if the chair is generous. I want to move to a real-world example. Mr McCosker, you mentioned you’ve worked on Rookwood Weir. Are there any lessons out of that in terms of the costs of bureaucracy? What were the direct costs of it? What were the costs of bureaucracy? I don’t know what you can provide for us on the record. It might be helpful.
Mr McCosker: It may be difficult on the record. Once it was built, obviously we had—everyone would be aware in the community that it was fought for years and years and years to build what is fundamentally a dam. It’s a weir but fundamentally a dam. Under Labor rule in Queensland, it finally happened. We have built that entire project and we were pretty much the labour supplier. We did all the building. You have to have a tier 1 contractor, so we were only 25 per cent of the whole project. But that whole project cost less than $300 million. It was in the order of $270 million, off the top of my head—in that order. When I saw all the accolades coming out once it was finally built and there was water in it, the state government expressed how great it was to produce a product like that for a mere $570 million. And I’m going, ‘Well, hang on.’ We provided all the engineering design, the whole build. There were components around the project that weren’t done; there was some road work done by other contractors. So there were bits and pieces. You could maybe guess $50 million. So even if you said the total costs were just over $300 million, we’re still short $200 million. I’ve questioned the—
Senator Matthew Canavan: Amazing. Just to be clear, the $300-odd million was the dam cost.
Mr McCosker: Exactly, yes.
Senator Matthew Canavan: And as you say, there were some related roads and bridges that needed to be built. That probably didn’t cost another $300-odd million.
Mr McCosker: No, definitely not. There would be $20 million in that.
Senator Matthew Canavan: Where does it go? Where does the money go?
Mr McCosker: I can give you numerous examples that are similar if we’ve still got time. We’ve provided as a business a small building in town here, a three-storey building that we run a mental health facility out of. That entire project was delivered for about $1.4 million. Meanwhile the council ran a similar project to deliver exactly the same services. Total cost: $40 million—$40 million production. What happens there? It now runs some—not preschools but the little three-year-olds; what do you call them?
Senator Matthew Canavan: Child care?
Mr McCosker: Yes, there are a couple of childcare days there a week. And our building is packed. We’ve got 12 businesses operating out of there full time with people waiting to get into that building because it’s provided cheaply to deliver mental health outcomes. You get the government involved: you get a disaster that the public will be paying for the next 30 years. Our building is fully paid for, done, operating. And I could repeat that over and over again. Get off our—let’s do it and we’ll support it.
Senator Matthew Canavan: I wish we had more time to go through that. Ms Wawn, I have lots of questions but only time for one, given we’re already over time. I notice there have been a lot of high-profile collapses of building companies. In a less high-profile position, are smaller builders facing the same pressures? Are some of them going under as well? We might not read about what’s happening there. And how much of this is because of inflation, supply chain costs, not being able to keep up with, say, cost price, build et cetera?
Mrs Wawn: Yes. Unfortunately a combination of fixed-price contracts generally entered into pre the massive price escalations of both materials and labour has meant that builders have been building at a loss. And when you combine also the issues around—taxation was put on hold in terms of payment of taxation. The ATO has now commenced debt recovery. Cashflow has just not been good for businesses. We know that. The banks tell us that the amount of mortgages taken on private homes et cetera for small to medium-sized businesses in our sector is exceptionally high to maintain cashflow while they get through those fixed-price contracts. So the pressure on small to medium-sized businesses in our sector has been immense in terms of that issue around fixed-price contracting. And there are of course situations where in the smaller home residential building there are legislative requirements at a state and territory level to ensure that fixed-price contracts are there to cover the homeowner. And we understand the reason why that is the case. But unfortunately the situation has arisen that hundreds and hundreds of homes have been built during that period at a loss for the builder.
Senator Matthew Canavan: Presumably this is exacerbating a skills crisis as well, in some respects. If some builders go out of business, they may not come back into the industry, I presume, or can’t.
Mrs Wawn: Many of them do. Certainly anecdotal evidence is that they will come back as a subcontractor to another builder and so forth. They do that. Nevertheless, it’s been a situation in which, no doubt, the higher than usual insolvencies in the industry could well be seen as a barrier to encouraging others into the sector. Our issue has always been the issue of ensuring that we are educating and doing support for our sector in not only the technical aspects but also the business acumen. There was a report by Shergold Weir that was commissioned by the building ministers pre-pandemic, and one of the things that they recommended was that all state and territory governments look at compulsory CPD throughout the duration of you holding a building licence. That only occurs in one or two jurisdictions. And the industry has been strongly supporting the full implementation of those recommendations of the Shergold Weir report to improve the viability of the industry so we can minimise some of these things happening.
Senator Matthew Canavan: Thank you.
Chair: Thank you very much to all of you for appearing before the committee today. If there are questions that you’ve taken on notice, we would appreciate it if answers were provided by the close of business on 11 March 2024.
Media contact:
Dee Zegarac
National Director, Media & Public Affairs
0400 493 071
dee.zegarac@masterbuilders.com.au