Friday, June 1, 2018    

JOHN SLATER              

Taxpayers are paying a 20-35 per cent 'IR premium'

for large infrastructure projects

The formwork may have only just finished on North Queensland’s much-vaunted new stadium, but the project is already shaping up to be a nightmare for taxpayers.


According to recent reports, the costs of Townsville’s new stadium could blow out by 30 per cent if the Queensland Government agrees to a set of strict workplace demands made by the Construction Forestry Mining and Energy Union.

That adds up to an increase of $50 million on top of the stadium’s already hefty price tag of $250 million.


For context, $50 million is enough to build three new primary schools from scratch.


Reports in the Courier Mail suggest that the pay and conditions which will cover the main phase of the stadium’s construction are yet to be finalised. 


But if the CFMEU’s existing enterprise agreement with stadium head contractor Watpac is anything to go by, sky high wages and restrictive work conditions are a given.


Once the laundry list of benefits including travel entitlements, employee benefits schemes, meal allowances, tool allowances are factored in, a carpenter and labourer on the existing Watpac enterprise agreement will each take home a salary worth over $160,000 and $145,000 a year.


Once the laundry list of benefits including travel entitlements, employee benefits schemes, meal allowances, tool allowances are factored in, a carpenter and labourer on the existing Watpac enterprise agreement will each take home a salary worth over $160,000 and $145,000 a year.


It’s typical for ‘once-off’ enterprise agreements for major public projects, like the one currently being negotiated for the North Queensland Stadium to deliver a 10 – 20 per cent increase on top of the rates contained in standard union enterprise agreement – a premium that’s supposedly meant to compensate for the complexity and scale of these ‘mega-projects.’ 


So don’t be surprised if the lowest-paid labourers employed on the site of the North Queensland stadium end up taking home more than double the average salary of a Queensland nurse or police officer. 

Nor are these lavish pay rates the norm among the nearly 1.2 million Australians employed in the construction sector. These lurks are enjoyed by less than one in ten workers lucky enough to find themselves working on tier one construction sites where the customer is often the taxpayer.   


These concerns are again playing out in the construction of Australia’s biggest light-rail project in Sydney, where alleged 'go-slow' tactics are threatening to blow out costs by $1.2 billion. 


If you’re still wondering why Australia is one of the most expensive places in the world to build major public projects and vitally needed infrastructure, these uncompetitive union-brokered pay deals provide the answer.   

Bloated wage bills are only part of the problem. Union-brokered enterprise agreements are also laden with restrictive work conditions that are a handbrake on productivity.


A compulsory calendar of 26 ‘rostered days off’ – a standard term in CFMEU pay agreements – forces building sites to shut down for what adds up to an entire month on top of public holidays every year – an unthinkable concept in most sectors of the economy. It’s estimated that delays caused by rostered days off in the construction of Melbourne’s EastLink tunnel cost taxpayers $18.4 million in lost toll revenue.


Another standard term of CFMEU agreements, the right to hold ‘2 x 2 hour union meetings,’ allow officials to halt work across an entire building site for up to half a day. This unqualified right to down tools was used by the CFMEU to exert pressure in enterprise negotiations during the construction of the Gold Coast Commonwealth Games Stadium in Carrara at a cost of hundreds of thousands of dollars.  


There were early signs that North Queensland’s Stadium was headed for union-induced chaos 18 months ago when it was reported that local contractors were apprehensive about putting their hand up to work on the project out of fear they’d be dragooned into signing a CFMEU enterprise agreement that would push up their pay rates by more than 50 per cent.

Their concerns weren’t unfounded. The Trade Union Royal Commission revealed dozens of examples of contractors being harassed and browbeaten with crippling boycotts after refusing to sign onto the union-favoured workplace agreements.

The situation unfolding in Townsville might be more noteworthy if it weren’t so common. As the Menzies Research Centre’s 2016 Report Constructing a Better Future highlighted, above market wages and uncompetitive work practices have become standard fare on Australian infrastructure projects.


For example, cost overruns for the Queensland Children’s Hospital exceeded twice its original price tag following a protracted union dispute that saw 15,000 days lost to strikes. Likewise, construction of the Wonthaggi desalination plant in Victoria ran more than $2.6 billion over budget thanks to a union-negotiated pay deal.


The Report concluded on balance, that taxpayers are typically paying a 20 to 35 per cent ‘IR premium’ on large infrastructure projects. Earlier this year, the Queensland Government pencilled in $44 billion in infrastructure spending over the next few years – the largest outlay in the state’s history. Unless something changes, up to a third of this record spend is set to be squandered on uncompetitive work practices dictated by unions in the absence of market forces.  


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2019 by Menzies Research Centre