2017 State Building Industry Forum

I welcome the opportunity to contribute to this Forum. The building and construction industry employs more than 64,000 people in South Australia. It’s an industry critical to our economy so I congratulate the MBA for convening this Forum. It’s an opportunity to take stock of the current state of our economy and South Australia’s future prospects.

Representing our building industry is something the MBA has been doing for a long time. Since 1884 in fact. The year in which the MBA was founded was also an interesting one in South Australian politics. The government at the time lost a no confidence motion over the introduction of a new tax. As a result, the Premier was immediately replaced by the Opposition Leader. While we don’t have such seamless political transitions these days, I’m naturally hoping for the same outcome next March. But I’m under no illusions about the task my team faces. Not only to win the election, but if we are honoured to be elected, to turn around our state’s economic prospects. 

This morning I’ll talk about some of the differences there would be under a Liberal Government. We have a clear plan for delivering the change South Australians need. If elected next March, my Liberal team is committed to:

  • Fixing the economy
  • Providing job certainty
  • Ensuring people keep more of what they earn, rather than pay more tax
  • Providing the standard of government services South Australians expect

Doing these things will be a great fillip to the building and construction sector. We want our state to reach its full potential. We used to be a state that strove to be the best. Punching well above our weight. But for a long time we have been trailing the other states on key economic indicators. And we have a Premier content that population decline is a virtue.

We need a government of much higher ambition for our state. A government focused on creating opportunities for everyone. Not one plagued by dysfunction and mismanagement after 16 years of inadequate leadership. Our plan is strong and clear. It is about building a better future so that our children and grandchildren have the chance to succeed here.

We want to, we need to:

  • Encourage existing businesses to employ more people and new businesses to invest here
  • Cut red tape so that operating a business is less costly and more efficient
  • Relieve government imposed cost pressures on households
  • Re-establish affordable, reliable and secure electricity supply
  • Ensure frontline government service providers have the support to do the job expected of them

My Liberal team is ready to deliver the change South Australia needs.

Over the coming months, my energetic and highly capable team will be sharing more of our vision and our plan with the South Australian community.

INDUSTRY TRENDS

Trends in building and construction underline the need for change. You are our fourth largest industry sector after health care and social assistance, retail and manufacturing. As the recent 2017 Building Excellence Awards confirmed, you are a sector with a well-deserved reputation for maintaining the highest standards in the work you do.

The quality of the entries as well as the fact this year’s awards broke records for attendance and the number of entries are fine testaments to your resilience. Because as Ian Markos recently observed in a press statement, South Australia has been going through a ‘persistent decline’ in building approvals.

I’ve looked up some of the figures. Over the past 12 months, total dwelling approvals have fallen 7% compared with the previous year. Housing finance commitments and the value of non-residential building are also down. Looking back over a longer period in total dwelling approvals, South Australia’s share of national activity was almost 6.3% when the current state government came to office in 2002. It has slipped to about 5.5%.

South Australia accounted for almost 7.5% of the nation’s private sector housing market in 2002, but it’s 6.9% currently. If we had retained our 2002 share, we’d be building an extra 705 houses a year. That’s close to double the number being approved each year in the Mt Barker Council area. The latest private sector housing approvals show 40 fewer approvals per month than at the same time in 2002.

In employment, the construction sector in South Australia currently accounts for 64,300 employees according to the latest ABS statistics. That puts South Australia’s share of the national construction workforce at 5.6%. When the current government came to office in South Australia in 2002, our share was 6.6%. If we had retained that share today, the sector would be employing about 11,500 more people.

Your sector has a proud history of creating work for young people as apprentices. It is a concern to us all that the number of apprentices and trainees in South Australia has fallen by half in the past six years. We have the highest youth unemployment rate in the nation.

My team is looking at how we can put more focus on better vocational education and training. Government has to get back to basics like this. It’s unacceptable for serious question marks to linger over the quality of South Australia’s publicly funded TAFE training. Both employers and students deserve to have a system that is providing them with the highest quality training and the best outcomes. One of the underlying reasons for these trends in activity and employment is South Australia’s declining population share.

DECLINING POPULATION SHARE

Our population growth has declined to less than half the national rate and the lowest of the mainland states. If South Australia had retained the share of the nation’s population we had in 2002, 182,000 more people would be living in South Australia today. That’s equivalent to the population of the cities of Port Adelaide-Enfield and Campbelltown combined.

We have the lowest proportion of children under 15 in our population of any state or territory. They’re the home buyers of tomorrow.

Recently, our declining population share had a significant political consequence. It means South Australia is to lose a seat in the Federal House of Representatives. As an excuse, the Premier has said the state’s lifestyle is being safeguarded by low population growth. That wasn’t what Labor once said. Soon after being elected in 2002, Labor announced a range of targets it would achieve. They included a South Australian population of 2 million by 2027 – a target Labor has now given up on.

I refuse to accept that population growth will squander our excellent and envied lifestyle. As our state has shown before, one is not incompatible with the other. We must aspire to growth which is economically, socially and environmentally sustainable.

The Premier’s response smacks to me of loss of ambition for our state – of limiting his government’s ambition to the political survival of Labor at the next election. South Australia deserves much better.

Economic growth to deliver better job and other opportunities is essential to arrest the migration of South Australians to other states. Over the past 16 years, our net migration has amounted to more than 52,000 people. That’s a full house at Adelaide Oval. Or equivalent to the loss of the entire populations of Whyalla, Port Augusta and Port Pirie. This translates into further lost opportunity for building and construction as well as other sectors of our economy.

No doubt your industry has looked at these population trends with increasing concern. We must reverse them. We’ll only do that with a growing economy that will keep more people living in South Australia and more people wanting to move here.

TAXATION

I turn to state taxation. Property taxes in the state budget now include:

  • stamp duties on the conveyance of property
  • land tax
  • the Emergency Services Levy on fixed and mobile property
  • regional natural resources management fees, and
  • the proposed major bank levy.

In the Parliament, we will continue to oppose the bank levy. No other state has followed South Australia with this impost, despite the misguided assumption of Treasurer Koutsantonis that at least one other state Labor government would. Labor has gambled with South Australia’s competitive position and lost.

We have also announced that we will restore a general remission on the ESL removed by Labor. These two measures will leave about $180 million a year with households and businesses, rather than in the government’s pocket. Neither the bank tax nor the ESL remission removal was put to the people at the last election so Labor had no mandate for these measures. Major tax changes should not be implemented in this way.

During its time in office, Labor has increased property tax revenue by more than 154% with an additional 22% proposed over the forward estimates. With inflation remaining low, this represents continuing significant growth in real terms. Property taxes make up more than 44% of estimated total state tax revenue this financial year. When Labor came to office, it was just over a third.

A Liberal Government won’t be able to cure this addiction to continually rising property taxation overnight. But blocking the bank tax and restoring the ESL general remission represent significant commitments to reducing cost of living pressures and improving the investment climate in South Australia. And as a further initiative to address cost of living concerns, we have also committed to establishing a cap on local government rates.

GOVERNMENT MANAGEMENT AND FOCUS

To contain the need for its own tax raising, state government spending must be well managed. This requires much more focus on outcomes. What is it that the government needs to achieve? And what is the most efficient and effective way of doing it?

South Australia has many capable people providing our public services. But leadership has been lacking from their ministers. The current government has 53 ministerial portfolios. Two departmental CEOs are each reporting to five ministers while another reports to four. This is dysfunctional.

I’ve announced that a Liberal Government will have a one minister, one department structure. This will ensure that should we have the honour of being elected at the next election, there’ll be a much more intense focus on the issues that are of the highest importance to our state. We don’t need more ministers to do that. But we do need more effective ministers with a clear sense of purpose, direction and accountability.

My team has extensive experience across a range of professional disciplines. We’ll bring to our task the sharpest possible focus on productivity and infrastructure.

Lifting productivity and ensuring more productive infrastructure go to the heart of encouraging the economic transformation and creating the sustainable jobs that will provide work for our next generations. From day one in government, we’ll move on the most urgent issues affecting productivity and infrastructure. We’ll also embrace the best available advice from outside as well as within government to guide our longer term priorities.

PRODUCTIVITY

South Australia continues to trail the national average of labour productivity. To address this urgent challenge, I will appoint a South Australian Productivity Commission.

The Commission will be an independent body to review economic and regulatory issues and propose policy reforms to drive economic growth, lift productivity and improve living standards across South Australia. The Commission will provide high-level advice on:

  • regulatory reform
  • improving government service delivery
  • improving the state’s financial position

In conducting its work, the Commission will be tasked to make recommendations for:

  • increasing public and private sector productivity
  • increasing private sector employment
  • improving living standards through alleviating cost of living pressures

The Commission will be a small statutory authority staffed by experts in their field who will draw on the resources and expertise of the public sector to assist their work. Its advice will be made available to Parliament and the public.

In speaking of government regulation, let me discuss one current example. There have been concerns about the practices of some labour hire companies. The South Australian Government has introduced a legislative response. But in doing so, it wants to further regulate Group Training Organisations as well as labour hire companies. Group Training Organisations are already subject to extensive legislation and regulation so there is no need to include them in this new measure.

The way to deal with this issue is to more effectively apply existing laws rather than introduce additional ones that will tie up businesses in even more red tape and regulation for no public benefit. That is why the Liberal Party has opposed the legislation. 

PRODUCTIVE INFRASTRUCTURE

If our economy is to become more productive, it’s essential we have a plan and program for efficient infrastructure. There is an immediate economic stimulus while infrastructure is being built. But as importantly, the right infrastructure through the right investment at the right time also lifts productivity. And by lifting productivity, we become more competitive as a state, better able to create the types of jobs we want in an increasingly competitive world. So infrastructure is central to everything a good government does.

Whether it’s growing our economy, getting our exports to market on time, building our schools, hospitals and roads, protecting our environment or enhancing our cultural and sporting facilities. We must plan for the long term.

That’s why, for example, I’ve announced our Globe Link plan – a combination of road, rail and air to provide a more efficient and safer corridor for freight movement into and out of metropolitan Adelaide and a much quicker link to market for our exporters.

To plan for the future, we must make the most of the expertise South Australia has today. We must better coordinate the efforts of the public and private sectors. This means the use of not only expertise within government, but in the wider community to guide and implement our infrastructure planning and ensure it is not derailed by short term political considerations.

A Liberal Government will establish Infrastructure South Australia as an independent body to develop a long term state infrastructure strategy and on-going infrastructure plans that prioritise major projects. The work of Infrastructure South Australia will be directed by a board of not more than five members. It will have an independent chairperson and up to two other people appointed in recognition of their industry experience. The Board will determine the general policies and strategic direction of Infrastructure South Australia.

If the government makes any amendment to the strategies and plans of Infrastructure South Australia, the Board will be able to advise the Government that it does not agree with the amendment and make that advice public. This will ensure full transparency and accountability. At least in its early years, Infrastructure South Australia will also have a senior officer based in Canberra to ensure effective and on-going liaison with federal departments and agencies and avoid delays in assessment of South Australian major project proposals.

Up to 2019-20, the Turnbull Government is spending around $50 billion on transport infrastructure around the nation. Much of this will be spent with the construction industry. It’s important that South Australia maximises its share.

My plans for a Productivity Commission and Infrastructure South Australia will embrace the public and private sectors because I believe in collaboration to get things done. No government can have all the answers. No government by itself, can deliver the growth and productivity gains required, or the dynamism and innovation our economy needs. Nor should any government seek to impose such a heavy hand on the economy that there is serious risk of investment drying up because of political uncertainty.

That is why my party has very serious concerns about some recent decisions of the current South Australian Government. It’s one of the reasons we oppose the state bank tax. But what has added further and significantly to investor uncertainty is the way re-development of the old Royal Adelaide Hospital site has been mismanaged.

Recently the Premier announced the Government’s rejection of a proposal by a preferred developer after almost a year of exclusive negotiation. In justifying what the Government has done the Premier said: ‘we will ensure that the interests of South Australians are paramount rather than the interests of private developers.’ It’s regrettable that South Australia has a Premier who constantly depicts the private sector as acting out of the narrowest of self-interests.

He is simply incapable of recognising that very many companies and businesses invest in our communities and accept important social obligations in addition to those associated with creating jobs and paying wages to workers. The closer we get to the election, the more the Premier is losing touch with South Australia’s economic needs.

A Liberal Government won’t treat the private sector in the way Labor has – with contempt and disdain.

NAVAL SHIPBUILDING PROGRAM

Turning now to future jobs in South Australia over the very long term, the Turnbull Government has delivered to our state the major share of the most significant nation-building project Australia has ever undertaken. The Naval Ship Building Program offers renewed opportunity for South Australia, including for the building and construction sector.

Construction is already underway to prepare the Osborne site for building the future frigates. Similar infrastructure development will be required to facilitate submarine construction from early in the next decade, also at Osborne. South Australia must fully embrace the opportunity to be a strong and steady partner in this project. A Liberal Government will seize it with both hands. To make sure we maximise the benefits for our state.

From having the skills and training programs that most effectively link our workers of all ages to the jobs available. To ensuring the local supply chain is geared for not only building but sustaining the ships and submarines to be turned out at Osborne over the next 30 years.

So that the benefits to South Australia endure for many decades after the launch of the vessels we will build. In time, we want to be building ships again for other countries as well – just like we once did at Whyalla. With this project, I know South Australia can do our nation proud. Because, as the construction sector also continues to demonstrate, South Australians are just as capable as people in New South Wales, Victoria and the other states.

The naval shipbuilding program is steering the transition of our economy into high-tech advanced manufacturing at the end of South Australia’s very long involvement in vehicle manufacturing. Our car makers decided to close because they did not think they could manufacture competitively in Australia. This highlights a fundamental obligation of government, to provide the conditions in which businesses are competitive so that they invest and employ more people.

ELECTRICITY

Any government doing that would not have allowed the premature closure of South Australia’s Northern Power Station. The immediate result was a sharp rise in the cost of electricity – a calamity for not only businesses, but households as well. The cause was a state government losing sight of its main purpose.

State governments shouldn’t be leading international experiments in the misguided belief they can save the world. All this has done is squander the advantage we had for a very long time of cheap energy keeping the cost of living down and maintaining a competitive advantage for our businesses to create jobs.

Our political opponents have demonised coal like they once demonised uranium and almost cost South Australia the Olympic Dam mine. Their latest ideological obsession has given South Australia the highest level of intermittent renewable energy in the nation, compromising the affordability and reliability of our electricity supply.

With the highest electricity prices in the world and the most unreliable system in our nation, few places anywhere are paying more for the transition to a lower carbon economy. Regrettably, it wasn’t as if we could not have foreseen the problems.

As we have exposed, the consequences of rushing far too quickly into renewables were clearly identified to the state government over a long period. But it proceeded anyway. Prepared to make South Australia the canary in the coal mine – costing us our own mine at Leigh Creek in the process.

When the government should have been instead, the bird on the wire watching over the emerging situation and acting in the interests of all South Australians. On Tuesday, I released the Liberal Energy Solution for South Australia. It is comprehensive and practical – not ideological.

It shows a clear path to reducing power prices, and keeping them down. To ensuring the lights remain on, whether or not the wind blows and the sun shines. Its priorities are providing South Australian families and businesses with electricity that is more affordable, more reliable and more secure. Those are the priorities a state government should never have lost sight of. We have designed our solution in conjunction with technical experts.

Key aspects of our solution were modelled by respected independent economic consultants, Acil Allen. There are 760,000 residential electricity customers in South Australia. On the average saving on their annual power bills under our solution, South Australian households will benefit by $230 million a year. We estimate the average household will save 15% on the annual electricity cost compared to prices today. For businesses, the savings would be even bigger.

Our solution delivers cheaper electricity to everyone, every day. It avoids locking up hundreds of millions of taxpayers’ money in a stand-by government generator. In his reaction to our Energy Solution, the Premier has spoken again about government control. But a government in control would not have seen our state lose the cheap, reliable baseload electricity we have had for more than 50 years, without anything to replace it. Nor would it have embarked on an uncontrolled rush into renewables.

In sharp contrast, our Energy Solution will deliver six key reforms that target the real needs of households and businesses for affordable and reliable electricity. The Liberal Energy Solution is another example of the significant policy work we have been undertaking to provide the plan for change South Australians are looking for. We will continue to roll out our plan in the months ahead.

CONCLUSION

I’d like to conclude with some personal observations. You are in an industry that builds things. Things that must be built to a schedule, standard and budget. Before entering politics just over seven years ago, I spent a lot of time in an industry that also builds things according to similar requirements. In my case it was furniture.

While I came from manufacturing and you are in the building and construction sector, I suspect nevertheless that based on our common private sector experiences of investing and employing people, we share some views about the role of government in the economy. Let me summarise mine.

Government needs to create the economic environment that allows industry to work and to grow safely, competitively and sustainably. Government sets the overarching policy, then it gets out of the way. Because you are the people who create the jobs. Who take the risk to borrow and invest. Who do the heavy lifting to keep the doors of business open. Who truly create a future for the many people you employ, as well as contribute to the communities in which you operate.

My political opponents like to tell people what’s best for them. While I want to enable you to do your best. The measure of government success is not what it does. But what it empowers others to do. A Liberal Government will work with you and for you – not against you. Thank you.