Tied up: untangling red tape a windfall for construction sector

Chris Williams reports exclusively for IndustrySearch.

With two weeks to go until last year's federal election Tony Abbott made a promise to cut red tape by $1 billion a year, every year. It may not have been the most high profile of election promises, but for the construction industry – along with the pledge to close the infrastructure 'gap' – it was the most important.

Of course promises aren't guarantees. We learned our lesson on that one back in 1996 following John Howard's infamous "non-core promises" speech, but seven months after Tony Abbott came to power action is now being taken, and there is reason for cautious optimism within the construction industry.

The announcement coincided with the release of Ai Group's CEO survey Burden of Government Regulation (read full article here), that claimed construction sector CEOs experienced a medium to high regulatory burden, in large part as a result of industrial relations, OH&S, as well as payroll, state and national taxes.

Open for business

Master Builders Australia CEO Wilhelm Harnisch welcomed the introduction of the red tape repeal legislation, saying less red tape would mean more jobs in the building and construction industry.

He said the reforms would help tackle both the undersupply of housing and housing affordability, at the same time accelerating investment in projects in the commercial building sector.

"The Bill is another important signal that the government is open for business in following through on its election commitment to slash the burden of over regulation and associated compliance costs," Harnisch said.

"Red tape may sound mundane until you connect it with business people spending hours grappling with excessive paperwork instead of directing their energies to the productivity of their businesses and creating new jobs.

"Building and construction is one of Australia's most intensely regulated industries and the nation's third largest employer. Cutting red tape will boost the productivity of the industry allowing it to generate more jobs and provide better value to consumers."

A stunt?

Harnisch insisted however that the process needed to be ongoing, and not a 'one shot' wonder, a fear shared by the population at large. A recent poll found 53 per cent of Australians surveyed thought red tape repeal day was nothing more than a stunt.

Stunt or not, a report for the Australian Building Codes Board found simplification of national regulations covering the building sector would benefit the economy to the tune of $300 million per annum, through reform to the National Construction Code and the work of Standards Australia.

Tony Maher, president of construction union CFMEU, is firmly in the 'stunt' camp, claiming the Tea Party-style repeal day was an attempt by the government to blame red tape for job losses, and the real culprit was the government's lack of investment in jobs.

"The red tape they intend to cut are (sic) in many cases the exact measures that were put in place to stop unemployment from rising – things such as better enforcement of 457 visa regulations, the Australian Jobs bill which aims to give opportunities to Australian suppliers on major projects, and government procurement rules which attempt to create local jobs," Maher said.

"For months now we have been warning that with higher unemployment on the horizon the government should focus on the real issues facing workers instead of undoing and lowering taxes.

"(But) the Abbott government has made its priorities clear: instead of working to save jobs they have spent their time in office so far pursuing vendettas on behalf of their mates at the big end of town."

What will change

For those operating a construction business however, the winding back of certain regulations can't come soon enough, and the extent of regulations under review is considerable.

The government's proposals include streamlining of the environmental approvals processes for new developments into a one-stop-shop; doing away with the requirement to register construction equipment hired for more than 90 days; eliminating the need for contractors in the building industry to report to the ATO every transaction they have with another contractor; and overhauling the Australian Government Building and Construction OHS accreditation scheme.

Among other changes, businesses operating in two or more states or territories will now be able to access a national scheme for self-insurance, reducing their regulatory burden by accessing one national workers' compensation scheme, rather than one in each jurisdiction.

The government also plans to remove other regulatory imposts that apply to more than 20,000 annual tender processes for Commonwealth agency work that currently impose additional costs on companies compared to contracts in the private sector.

With Australia's home building industry worth some $70 billion to the economy each year, its peak body, the Housing Industry Association (HIA), also threw its support behind the repeal day initiatives.

"The allocation of parliamentary sitting time to freeing up builders and the economy by reducing laws, rather than introducing new ones, shows a genuine commitment by government to addressing this chronic problem," HIA Chief Executive – Industry Policy and Media, Graham Wolfe, said.

"Inefficient and unnecessary regulation is a real bugbear of the building industry and adds costs to building a new home.

"An obvious example is the ATO contractor reporting requirements that was placed on the home building industry.

"These laws unfairly transfer the burden of information collection from the ATO onto small business principal contractors and builders, imposing considerable additional administrative and accounting red tape."

Wolfe said that in 2011 Treasury had estimated that businesses required to prepare and lodge a report would be hit with a one-off cost of $90, but that in fact his members had advised they spent an additional 17 to 18 hours on paperwork, and faced extra costs of $1,621 on average.

"It is not uncommon for the bureaucracy to underestimate just how time consuming compliance can be, so it is essential these tasks are not duplications, involve inconsistent definitions across portfolios or pass the burden from government to small business," Wolfe said.

Master Builders' Harnisch concurs, particularly in the area of ATO contractor reporting requirements.

"This is has led to a massive red tape nightmare for the industry and is a classic case of regulatory overkill where legitimate contractors are being penalised in order to catch a small minority who break the law," he said.
               
Where to from here?

Harnisch stressed however that as important as eliminating inefficient and redundant regulations was, reforming the process by which future regulations were made was equally as crucial if we were to prevent mountains of red tape from recurring.

"New regulation should only ever be considered following a rigorous assessment about whether it is needed in the first place including a requirement to closely consult with business," he said.

Dr Bronwyn Evans, Chief Executive Officer for the country's peak standards body, Standards Australia, went further, saying proper and appropriate consensus-based standards negated the need for regulation in many instances.

"Rather than opting for regulatory remedies in the first instance, we should instead turn to standards and codification," she said.

"More often than not, voluntary and consensus-based standards are able to guide the market, or society, to the desired outcome, leaving regulators needing only to apply a light touch.

"Legislation is prone to amendment or disbandment due to the unintended consequences it tends to generate. "

Dr Evans said of the 6,500-plus Australian Standards, three-quarters remained voluntary and only about one-quarter became mandated either through law or contracts. This meant, Dr Evans said, that the carrot beats the stick on three out of four occasions.

"Sensible, measured, consensus-based Australian Standards offer the remedial power to affect lasting change," she said.

"Government intervention should be the last resort, appropriate standards should be the first."