Why targeting independent contractors could push up house prices: Gottliebsen

What are the biggest threats facing the Australian economy? The immediate answer will be a string of overseas threats that encompass the US, China and Europe. Graham Kraehe would add a badly designed carbon tax.

Let me add a home-grown threat that few would currently recognise – the carefully orchestrated government campaign to decimate independent contracting in Australia. If the Government succeeds it’s very likely it will increase the cost of building a house by 30 or 40% and devastate contractor-dependent industries like IT.

The Government claims that a series of inquires are only targeting “sham” contractors but it is becoming clear from the way these attacks are being organised that a small contractor will be declared an employee unless they can prove otherwise. The word “sham” is merely a politically correct smokescreen to obscure the real agenda.

The various inquiries include an Australian Building and Construction Commission inquiry into contracting. These days the ABCC is headed by an ALP friendly person, Leigh Johns. Then there is the Fair Work Ombudsman audit on contracting concentrating on hair and beauty, cleaning and call centres. Finally the Tax Office has joined the game.

The biggest campaigners for the decimation of independent contracting in Australia are the building unions lead by the CFMEU and the ETU. They foresee a huge rise in their membership if independent contractors are made employees. They want to see the Fair Work legislation changed to decimate small contractors over a wide area. They are big supporters of the Greens so after July 1 there will be no problem passing legislation through the Federal Parliament under the guise of attacking “sham” contractors.

Last night I was talking with a group of independent contractors in the commercial building industry. They will not be affected and they told me that in large commercial projects there are not a lot of small independent contractors so they do not see major change. But in the housing industry the costs will go through the roof.

In commercial building, including high rise apartments, the going hourly rate is between $50 and $60 which can rise above $100 for contracts where unions have negotiated more expensive deals such as the Victorian desalination plant. But there are a whole series of work practices in commercial building that restrict productivity which is one reason why apartments are more expensive than houses. Of course in the case of ‘rort’ contracts these practices go much further requiring many more workers.

In housing most (but not all) independent contractors charge an hourly rate in the vicinity of $45 an hour, but the real difference is not the hourly rate but the flexibility and efficiency that the independent contractors deliver. Take that away by imposing employee relationships and union work practices and my contacts in the contracting industry say you will see the cost structure probably rise between 30 and 40%.

The truth is that we have some excellent rules from the Australian Taxation Office which eliminate most sham contractors, but the unions have attached the world “sham” to small contractors and their objective is for independent contracting by trades people to be replaced by union members who are employees.

No single action could decease productivity in Australia by a greater amount. But it is being pushed by the groups who fund the ALP and the Greens. This is going to be one of the toughest fights Australian business has ever had and the odds are that business and the economy will lose. So will those who want to build or renovate a house.

This article first appeared on Business Spectator.