Wednesday, 5 February 2025

Environment and Planning Committee

Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works

Nina TAYLOR (Albert Park) (10:33): As it so happens, I am going to speak on the same report, Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works. There we go, it is a slightly different angle, but nevertheless, the principle is there. First of all, I do want to thank the committee membership. We had the chair, the member for Wendouree; the deputy chair, the member for Morwell; the member for Bass; the member for Monbulk; the member for Nepean; the member for Ripon; the member for Croydon; and the member for Warrandyte.

It is no doubt a very important issue – it goes without saying – and I know of people myself who have been, for want of a better word, stiffed even after having submitted work, such as engineers. I mean, it is the whole chain that can be impacted. It is completely unfair. When they do the work in good faith and that hard work is not honoured, it is simply not acceptable.

I will note the government has responded to this report, but of course to give credence to the response we have to speak somewhat to what triggered the response to the report in the first place.

Setting some of the parameters, security of payment problems in the building and construction industry have been repeatedly acknowledged over the last hundred years. Since at least 1897 governments around Australia have implemented incremental reforms to address the problem of building contractors and subcontractors, workers, tradies and suppliers of related goods or services going unpaid or underpaid or being paid late for their work. Sadly, this is something that has happened continually, although there has been, and it is ongoing, a lot of work to correct, for want of a better word, the vulnerabilities within, can I say, the hierarchical nature of this system.

Speaking to that point, in recent decades government-initiated reviews have examined systemic poor payment and other contracting practices in the building industry, noting how significant it is and how far reaching and how important it is when we are looking at economic circumstances. Such practices take advantage of the highly fractured nature of the industry. We can see that inherently in the way the industry is formulated, for want of a better word, in Australia, where subcontractors complete over 80 per cent of construction work. I mean, my goodness, when we look at it that way, we can see how far-reaching the impacts can be, positive or negative. That is the highest proportion in the world of passing financial risks down the construction contracting chain. We can see, unfortunately, as a result of that hierarchical structure that it seems to be, in many instances – based on information here and otherwise that was recorded through the committee report and I would say over decades – that this is something that ends up with the person most vulnerable in the chain being really impacted. This is all the more impetus when it comes to making sure that the system functions as efficiently as possible.

Difficult economic conditions are exacerbating payment issues and contributing to a high rate of insolvencies. It has already been mentioned about the issues with the war on Ukraine. I am not leaving it there because this is why legislative reform is so important. I should say that the government has carefully considered the report’s nine factual findings and 28 recommendations for reform, and as discussed in the report, the government broadly supports all 28 of the committee’s recommendations – I must pay respect to that hard work that is obviously being giving credence – with 16 recommendations supported in full and 12 recommendations supported in principle or in part. That is certainly hopeful.

I should say that the committee held two public hearings, and they received testimony from 10 witnesses, including the Department of Transport and Planning and the VBA. I note, and I just want to put in a qualification, that we are replacing the Victorian Building Authority with a new, more powerful watchdog, so reform is current and happening.