The ABCC was a disaster for productivity

By Bernard Keane

July 25, 2022

Australian Building & Construction Commission (ABCC) Commissioner Stephen McBurney
Australian Building & Construction Commission (ABCC) Commissioner Stephen McBurney. (AAP Image/Mick Tsikas)

While the property industry and employer groups are warning that Labor’s promise to abolish the Australian Building and Construction Commission (ABCC) will lead to disaster in the building industry and militant unions running amok, the ABCC has been one of the least successful regulators in Australian history since it was restored in 2016.

According to the Coalition and property and construction groups, the ABCC was all about productivity. Under the original, Howard-era ABCC, it claimed productivity in the building industry improved. This was completely false — the biggest surge in construction industry productivity occurred after Labor gutted the ABCC the first time around. But the Coalition insisted that restoring the ABCC would lead to an improvement in productivity again. In fact, the very name of the bill re-establishing the ABCC was the “Building and Construction Industry (Improving Productivity) Bill”.

The ABCC “is a vital economic reform that is needed to boost productivity in the construction sector”, the Property Council said when it was re-established. “The return of the ABCC will bring a material boost to productivity and do so very quickly.” And Coalition ministers parrotted the same lines when the bill was being passed after the 2016 election. The ABCC was “a fundamentally important reform … most particularly so that we can return productivity to a sector that is so tremendously important”, said one minister during a Senate debate. It continues now. The Australian is today thundering that dumping the ABCC will “sap productivity”.

So if productivity is the fundamental purpose of the ABCC, how has it performed?

For that, we turn to the Productivity Commission (PC), which produces an annual productivity report. Luckily the PC has the perfect base — in 2017, as part of its Shifting The Dial productivity reform report (studiously ignored by the Morrison government), it found labour productivity between 2007-08 and 2015-16 in construction had seen annual 2.1% growth. And while some of that period covers the last years of the Howard-era ABCC, the bulk of it covers the “neutering” of the ABCC by Labor, its subsequent abolition by Labor, and the period up until 2016 when the Coalition couldn’t get the Senate numbers to restore it.

So now that we have a base, how has productivity performed since the return of the ABCC? The PC’s productivity reports tell the story: in 2017-18, construction sector labour productivity fell by 2.4%. OK, even if the PC claimed the ABCC would turn productivity around “very quickly”, surely the ABCC was still getting its feet under the desk — turning an industry round takes a while. So did things pick up in 2018-19? Labour productivity in construction that year was down, erm, 2.6%. In 2019-20, the last year before the pandemic set in, productivity also fell by 2.6%.
Under the ABCC, productivity in construction went into reverse.

What’s peculiar is that the ABCC made productivity worse even by the Coalition’s own standards: in 2014-15, labour productivity in construction only fell by 0.8%. In 2013-14, it fell by 1%. So the Coalition presided over worsening labour productivity in construction, but re-establishing the ABCC accelerated the decline significantly.
For a substantial lift in construction productivity, you have to go all the way back to Julia Gillard’s time — in 2011-12, labour productivity in construction rose 5.8%.

Based on what its proponents all agreed was the fundamental point of the ABCC, it’s been a spectacular failure. In fact, it’s hard to think of a regulator anywhere that’s been a bigger failure, ever.


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