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Interview – Ross Greenwood, 2GB Money News

3 July 2019

Subject: Building and Construction confidence, cladding.


Minister for Industry, Science and Technology Karen Andrews was interviewed on 2GB Money News by Ross Greenwood.

Ross Greenwood: Over the past few weeks we have become increasingly alarmed about the building industry, as you're aware. The reason is not only going back to the beginning of the year - the Opal Tower in New South Wales in Sydney. The cracks there that caused people on Christmas Eve to basically be pushed out into the into the streets as Santa was supposed to arrive. But then you go to the Neo200 building that caught fire- a cladding fire in Spencer Street, wasn't the first one. The LaCrosse building in La Trobe Street had previously caught fire. But then you go to building standards across this country, because you've got an inquiry going on in the ACT right now. There have been two inquiries in New South Wales, and still you've got fundamental problems in the building and especially in high rise construction.

Now, as a result of what's taking place at the Mascot Towers, where again people had to be evacuated and there have been cracking in a building that's ten years old, I believe that there's becoming increasingly a crisis of confidence for people to buy into high rise apartment buildings. Now that is a fundamental problem. But I'm not the only one who has got those concerns. It even goes to insurers - now just to explain, if you are a certifier in this country, you basically sign off on a building to basically say that it's okay. And you could be a surveyor in other parts of the country, could be an architect. If something goes wrong, it's your professional indemnity insurance that generally gets hunted down first by body corporates to try and get the money back. The fact of the matter is right now the insurance industry has deserted this industry, and it's leading to the crisis of confidence. If you didn't have certifiers, and they are required by law to have this insurance, then guess what? You don't have building and construction as our second largest employer across all of Australia.

Now it all came to light to a certain extent when one certifier called Troy gave us a call. He was in Windsor. Here's what Troy had to say about the price of his professional indemnity insurance.


Caller Troy: We're a small business at Windsor doing private certification, and we’ve been in business for 16 years, and our PI insurance policy last year was $18,000. I got the quote back for our policy today, it was $221,000.

[End of excerpt]

Ross Greenwood: $18,000 to $221,000. So now a little earlier on today I also spoke to Philip Halton. Now, Philip Halton is the deputy commissioner at the Queensland Building and Construction Commission. So there's a problem right around Australia. Okay, the insurance industry has disappeared and they don't want to insure people. So, as a result they have given some ability for certifiers to be authorised to operate. But those policies can exclude combustible cladding. Have a listen to him.


Phillip Halton: What's happened in the last 24 hours is the Queensland Government, they've said to the certifying profession, we will still require you to have professional indemnity insurance but we will allow you to have professional indemnity insurance with a carve out.

[End of excerpt]

Ross Greenwood: Okay so the carve out is about the cladding. But it doesn't fix the crisis of confidence. The people are not certain right now if they buy into a high rise apartment, whether that building will stand the test of time, or whether they could be up for tens or hundreds of thousands of dollars in the future in either legal fees, or fees to fix a building that might be wrong. So, I’ll say it's a crisis of confidence and the construction industry is our second largest when it comes to employment, so it needs a government approach. The Minister for Industry Science and Technology at the federal level is responsible for this, and that is Karen Andrews. She's on the line right now. Many thanks for your time Karen.

Karen Andrews: Hello Ross. It’s a pleasure to chat to you tonight.

Ross Greenwood: Okay, so I’ve set that up to explain, what are you doing to fix the crisis of confidence?

Karen Andrews: Look, I agree with you that there is a crisis of confidence, and I am very keen to do whatever I can to ensure that there is greater confidence in our building and construction industry. There's a number of key players in this. Now, clearly the regulations for building lie with the states and territories. So the Commonwealth has responsibility for the national construction code, each state and territory then takes that construction code and develop their own regulations- and it’s on a state by state basis. So there's no real consistency across the states and territories, and it's been like that for many, many years. But the states and territories have responsibility for the regulation.

Now we have a Building Ministers’ Forum which I chair, and the other members are the state and territory building ministers. About two or so years ago, there was a report commissioned by Peter Shergold and Bronwyn Weir looking at the issues in the building and construction industries. And they delivered their report, I think, in about February of last year, which is titled Building Confidence, because they recognised that a lot had to be done to build and rebuild confidence in the sector. It had a series of 24 recommendations for the states and the territories and the Commonwealth to look at. It recognised that each jurisdiction had its own responsibilities and had its own rights, and that the regulations were state and territory matters. Now, what you're seeing with insurance – and I’ll start firstly with the professional indemnity insurance – relates to chronic non-compliance and a lack of enforcement by the states and territories to the point where the insurers are now starting to walk away because they're concerned about what their liabilities will be. Now I'm not prepared to let the insurers off the hook here because they have happily taken quite exorbitant premiums for many, many years. But it's clear that they have under insured. They're now concerned that because of issues such as combustible cladding that their liabilities are so great that their response is to either not insure or to escalate the premiums. And that is clearly not acceptable so I'm not prepared to let the insurers off scot free. And I'm also not prepared to let the state and territory governments off scot free.

Ross Greenwood: Okay just one thing if I can jump in there. How often does that committee of the building ministers meet?

Karen Andrews: It last met of February of this year and it's meeting again on the 18th of July. So, two things are happening: the Building Ministers’ Forum will meet 18 July but directly ahead of that meeting we will have a separate meeting, we're bringing in some key representatives of industry. We'll hear about the insurance issues in more detail. We'll hear also from Bronwyn Weir in terms of the report that that she jointly prepared. What I want to do is work with the states and territories to deliver an outcome that is nationally consistent across the states. Unfortunately, thus far the states and territories have been reluctant to look at a national approach to what is a building crisis. Now the role of the Commonwealth in the building sector is to work with the states and to have responsibilities for the national construction code. I can bring all of the parties together. I have already put on the table an offer from the Commonwealth to establish a taskforce to fund a task force that will look at nationally consistent implementation of the recommendations of the building confidence report. I put that on the table at the Building Ministers’ Forum in February and it was rejected. So the states and territories said they were not going to walk away from their responsibilities in the building and construction sector. Now unfortunately very little has happened since then and the states and the territories and particularly Queensland have left it until the last minute to try and deal with the professional indemnity insurance issues.

Ross Greenwood: Karen, knowing what you do right now, you're the minister responsible at the federal level, would you buy a high rise apartment with confidence today sight unseen? Would you walk up and simply say right I’ll buy that one? Would you have the confidence to do it knowing what you do, knowing the stories that you have heard, knowing the standards which clearly in some areas have been lax? Would you buy one with confidence?

Karen Andrews: Okay, so I also have a degree in engineering. So if I were to purchase a high rise apartment I would be asking a lot of questions and that -

Ross Greenwood: - Give me your first five questions, Karen.

Karen Andrews: My first five. My first question; from which everything else would flow depending on the answer: is that it has this building being constructed in accordance with the relevant building and construction codes.

Ross Greenwood: I'd expect them to say yes to me and then I’d go where do I go from here? Because I mean of course everybody's going to say they've built it in compliance. But as we know people in the industry, well maybe like you sometimes embellish the truth. How do I know, how am I confident, I'm a smart person I should be able to work this out, how do I know whether that building there is actually going to be one the cracks in ten years’ time or which has as has water ingress or which may not necessarily comply with fire and safety standards? I’d have to ask about cladding wouldn’t I for starters?

Karen Andrews: Well cladding would be one of the issues but the short answer is that you wouldn't know. That you would be relying on the advice that you are given. You would be relying on the engineers, the builders, the architects and the building certifiers having done their job. And that’s where there has to be a lot of openness and a lot of transparency because people are very concerned about their buildings now. So, cladding is certainly one issue and I know that the states and the territories are undertaking audits. They’re at various stages now. There's inconsistent views as to whether or not that information should be made public. The Victorian Minister, Richard Wynne earlier this year indicated that there was a risk in making information public because it could potentially lead to arson attacks. I haven't pursued that more rigorously. It's a question for the next Building Ministers’ Forum. That has to be balanced against people quite possibly residing or working in a building that has a fire risk because there is combustible cladding in place …

Ross Greenwood: … Or a consumer buying, Karen, who has the right to know to a certain extent. Alright so then we go to one other aspect of this and that is quite clearly with the industry; the building and construction industry being such a significant industry in Australia. If you’ve got problems with insurance if you've a crisis of confidence of people not certain about whether they should buy it or not. Surely that is leading to potentially a drag on the national economy and or employment or all these things. This is the reason why it sort of lands back in your lap, to a certain extent because if it has an impact on either state and or the national economy that clearly has an impact on your budget, on the economic growth figures. All those types of things and that's the reason why it leans back in your office to a certain extent.

Karen Andrews: We aren't the state’s ATM. Basically this is an issue that the state and territories are entirely responsible for. It is a compliance and an enforcement issue with their own regulations. They’ve left it until the 11th hour. They haven't put in place all of the implementations from the Shergold Weir report. They're now sitting back, twiddling their thumbs trying to figure out what they're going to do. They need to show some willingness to come to the table, to cooperate, to harmonise building regulations across state borders. They've shown no such willingness to do that and quite frankly it's not the Commonwealth's role to clean up the mess that the states have created.

Ross Greenwood: I'll tell you what, really good to have on the program. It's really interesting but absolutely vital issue not only for the national economy right now but also for the people who might be buying but those people working inside the building industry. The Minister for Industry Science and Technology who also has an engineering degree. So if you're going to buy an apartment give her a call. Karen Andrews, I appreciate your time on the program this evening.

Karen Andrews: It’s a pleasure.