Minister for Industry, Science and Technology Karen Andrews was interviewed on Sky News by Peta Credlin.

Peta Credlin: Well, the spotlight’s on the building industry this week in the wake of a number of construction issues across several states. Last night, as the councillor responsible for planning at the Melbourne City Council, Nicholas Reece informed viewers that cladding brought in from China that claims to be able to withstand flames was never actually tested. Well, there are concerns that a flawed regime of state regulations and skyrocketing insurance premiums pose a threat to the national economy. The Minister responsible, Karen Andrews, is set to meet with her state counterparts this week, and as a former engineer herself, she’s firm when she says she wants the states to lift their game.

Industry Minister Karen Andrews joins me now live from the Gold Coast. Minister, thank you very much for your time tonight. I reference there that you’re going to meet with state counterparts at the end of this week. How big is the problem we’re talking about?

Karen Andrews: It’s a potentially enormous problem that we’re facing in the building and construction industry. Now, the problems that have been in that sector have been there for a very long time, but they have built and built and built simply because there’s been very little action taken by the states and territories.

So, they’ve been aware that there are systemic problems in the building and construction sector. We all moved a couple of years ago to engage Peter Shergold and Bronwyn Weir to prepare a report, which they’ve released, called The Building Confidence Report, which sets out a number of the issues that we were all aware of previously in the building sector. And it all comes down to non-compliance and lack of enforcement with state regulations.

Peta Credlin: Alright, so let me get into that for a moment. Are you saying that deregulating parts of the industry state-by-state, I mean, every state’s different to the level of deregulation they went down but I talk here particularly about building standards and things like the certification or the occupancy certificates that are granted buildings before they can be sold and inhabited, are you saying that deregulation here has been a problem and that states, perhaps, have been too keen on stamp duty revenue to address some of these problems?

Karen Andrews: Well, that’s probably a separate but important issue. What I’m saying relates initially to the discussions that we’ve been having about the combustible cladding, where we have the National Construction Code. The states and territories input into that, as does the Commonwealth have a role in the National Construction Code, and then the states and territories develop their own legislation from that code.

Now, there’s not consistency across all of the states, but when you look at the issue of cladding the National Construction Code is very clear that its use is restricted in buildings that are over three storeys high. Now, what’s happened is that that cladding has been fitted in a number of buildings, many buildings, in many states and territories around Australia. And there are potential problems with that cladding being put in place.

What was made clear in the Shergold Weir Report and what I’m saying is that the issue of combustible cladding being used where it is clearly restricted in the National Construction Code means that there has been a breach of the code and that there’s been a breach of the state and territory regulations to allow that to happen. So, the issue is one of the states not complying with the relevant building codes in their state and not enforcing those building regulations. So it’s a compliance and an enforcement issue, a lack thereof, in the states that has lead us to problems with cladding.

Now, there may well be other issues with buildings that are also a result of a lack of compliance and lack of enforcement in the building sector, but that’s probably a separate issue to the frontline issue at the moment, which is cladding.

Peta Credlin: Okay. Let me just ask you about cladding. Last night on my show Nicholas Reece was on the program. Now, he is a councillor, an elected councillor on the Melbourne City Council – big council, lots of development in inner city Melbourne that is now in his portfolio. He is responsible for planning.

He claimed last night that there has been circumstances of cladding imported from overseas – he mentioned in particular China – and he said it says the cladding is fire retardant. He said that’s never tested and the cladding becomes available to the market. He intimated last night that this is a responsibility of the Federal Government – to check what’s imported into the country. But you seem to be saying today that there is a building code that says you shouldn’t use this cladding in any event if the building is over three storeys high.

We saw today the Victorian Government has announced a fund to deal with some of the retrofitting. Unfortunately, taxpayers yet again on the hook for something that’s nothing to do with them, but they’ll be fixing the cladding on a number of buildings. It’s a $600 million fund, which some say is nothing like what it’s going to cost. Is there calls for the Federal Government to get involved? Have you had conversations and will you get involved in stumping up, again, more taxpayer funding to fix this problem?

Karen Andrews: Well, the Victorian Government is portraying it as a $600 million fund, but the Victorian Government is only putting in $300 million. They’re now claiming $300 million from the Federal Government and saying that, effectively, the alternative is that there needs to be some sort of a levy to make up any shortfall in those funds. What I would say to the Victorian State Government, and all other state and territory governments is that the issues that they’re facing are of their own making, and it’s their responsibility to fix the problems that they created. So, the Federal Government will not be providing a bail out to the state governments at all. The treasurer, Josh Frydenberg, was very clear on that today, and I back him 100 per cent with what he’s saying. The states have been aware of this issue for a very long time. They could have acted, they haven’t acted, and it’s now up to them to fix the problem.

Peta Credlin: I couldn’t agree with you more, Minister. It’s not often that you hear such frank talk from a minister in this sort of issue, particularly there seems to be a lot of buck passing that goes on between the state and the Commonwealth, and the politics get ahead of the reality, you’re standing firm. On the issue though of cladding, and the deregulation, and certification basically being privatised; what’s happened? Has state government got so caught up on the rivers of gold that was coming in, particularly eastern seaboard states, from stamp duty, that they didn’t really check up on how well-built these buildings were, or how professional the certifiers were?

Karen Andrews: It goes to the whole issue of building standards, and what is the quality of the work that is being done on our buildings. Are they up to the appropriate standings, is the work conforming to the plans that have been approved? Are the certifiers looking at the products being used and checking them properly? So, there’s a whole range of issues, and they were explored by Peter Shergold and Bronwyn Weir quite extensively. So, they’ve looked at the issues of certifiers, and I know there are some concerns that have been raised by industry about making sure that certifiers have the appropriate qualifications and they know what they’re going to be looking for and they take full accountability and of course that in turn has led to the issue that we have now with professional indemnity insurance where some of the insurers are now increasing enormously the cost of insurance, or alternatively, walking away from professional indemnity insurance for certifiers. Now, that has created a crisis of confidence in the building sector.

Now, the states and territories have known this was coming for a very long time, and some of those states left it to five minutes to midnight, or in some cases, five minutes past midnight to even act. And what they’ve done is they’ve negotiated a carve out, effectively, for some of the certifiers so that they- if they’re not certifying high rise buildings and cladding’s not going to be part of it, they could potentially then have insurance that doesn’t cover them for cladding, because they’re not doing that work, and that would be at a lower cost. But I have a small amount of sympathy for insurers, not much quite frankly, because they have collected premiums for a very long time, and when things got tough they’ve now escalated what their costs are. But they’ve had to do that on the basis of the risk that they have to manage. And because there’s been a lack of compliance and a lack of enforcement by the states with their building codes, the insurers are now facing potential – significantly costly – rectification work in the building sector.

So, until states and territories work out what they’re going to do to solve this problem, and implement it, and do as industry wants – which is to do it on a uniform basis across Australia – that’s what the national response is, that’s not the Commonwealth taking responsibility, that’s the states working together. And there is nothing preventing them. They could have done this for many years, they’re still failing to do it now.

Peta Credlin: I’ll tell you what Minister, good luck for your meeting coming up. I hope the engineer in you, not just the federal minister looking after taxpayer dollars, but I hope the engineer in you whips them into some sort of shape and we fix this problem, because it’s a real worry; construction’s a massive component of our GDP and jobs, and of course we’ve all got to have somewhere safe to live. So, thank you very much for your time tonight.

Karen Andrews: It’s a pleasure.

[END]