Mike Kane has been leading international building and construction materials supplier Boral Group since October 2012, after previously holding the role of Boral USA president.
Having been involved in the construction and building materials industry for more than 40 years, with extensive experience across a variety of senior executive roles throughout the US, Australia, Europe and Asia, Kane was well positioned to provide a global perspective on the local industry’s standing in relation to its overseas counterparts.
Unfortunately, the news was not bright. Kane pointed out that within the last decade, Australia’s high wages, poor productivity and exchange rate gains had caused it to slide from 19th place to rank 25th in the Boston Consulting Group’s 2014 global index of manufacturing cost competitiveness.
According to Kane, base wages in Australia were up 50 per cent in a decade from $AUD23.09 to $AUD34.13 per hour. This was compared to a 27 per cent increase in the US Sun Belt – the southern region of the US – to $USD22.32, which Kane told conference delegates was “about equal to the average wage in Australia 10 years ago”.
“Put simply, Australia’s manufacturing cost structure currently exceeds the US by 30 per cent – and that separation is accelerating,” Kane declared.
The Boral CEO and managing director added that Australia’s current uncompetitive cost, regulatory and productivity environment was leading global miners and contractors to take their major projects elsewhere.
“Why would they look elsewhere?” Kane explained. “Perhaps the flirtation with a mining tax, the misguided and failed carbon tax and other examples of anti-industry sentiment; unrestrained industrial disruptions and the absence of remedies for illegal job site conduct; unproductive labour entitlements and a work calendar distinctive for its focus on excessive days of tools down, not up – not to mention anti-competitive penalty rates.
“These practices are impacting the productivity of construction materials suppliers, lorry owner-drivers and other building contractors. They are costing builders, driving developers offshore and they are costing Australian jobs.”
UNLAWFUL ACTIVITY
At the heart of Kane’s address was union involvement in the Australian construction industry’s decreased productivity. He cited alleged attempts by certain union officials to control construction sites, contractors and suppliers. {{image2-A:R-w:250}}
Kane claimed that since February 2013, “rogue union officials” from the construction branch of the Construction, Forestry,
Mining and Energy Union (CFMEU) had been inciting illegal industrial action against Boral, which he described as “an orchestrated campaign of intimidation and interference”.
He stated that Boral’s refusal to collude in unlawful activity had resulted in a loss of about $10 million as well as ongoing
denial of access to more than 20 major construction projects.
“The productivity of Australian construction sites is being threatened by monopolist unions’ attempts to control those sites by violating secondary boycott and cartel conduct laws,” Kane told Quarry.
“What the local industry needs to understand is that the illegal conduct that goes on around Australian construction sites is almost unique to this country and very different from other parts of the world.
“In most developed countries, secondary boycott and cartel laws are vigorously enforced, and for unique circumstances that are really not clear to me, Australia has evolved to allow this behaviour to go on without regulatory interference. That’s what needs to be changed.”
CHANGES ON THE HORIZON
While regulators had been slow to address these issues in the past, Kane said change was slowly but surely taking place.
The Federal Government had proposed to reinstate the Australian Building and Construction Commission, the Royal Commission into Trade Union Governance and Corruption had placed a public spotlight on the matter, and the Australian Competition and Consumer Commission (ACCC) was undertaking further investigations into the alleged illegal secondary boycotts mounted by certain factions of the union movement against Boral.
Last month, the Victorian Government also released a new code of practice for the building and construction industry that Kane described as a “crackdown” on “corrupt and illegal practices”.
In his CMIC14 address, Kane said, “We believe there is a consensus building across Australia to rein in the illegality, the stand-over tactics, the manipulation and anti-competitive conduct that has been exposed in great detail – and I suspect there is more to come.”
Kane highlighted to delegates that they, too, had a part to play in overcoming these challenges.
“We can all start to accelerate change by recognising what has been happening in our industry for decades – a situation where rogue elements of a powerful union have used their industrial muscle, intimidation and threats to exercise absolute control over entire projects,” he said.
“We can also recognise that as an industry, we have not only acquiesced to these activities but on many occasions we have ignored the problems and in fact encouraged these practices to become part of our industrial culture. And we can use our public voice to support and assist the ACCC investigation – and support moves by the Federal Government to make legislative changes in this area. “As an industry, we have a responsibility to speak up.”
Kane told Quarry that this responsibility was not limited to the construction industry.
“Energy and mining projects are being diverted away from Australia because of its uncompetitive cost climate and unproductive construction sites, and at the end of the day, if Australia doesn’t get its fair share of investment and major projects, the quarrying industry will be just as affected as any other construction market supplier,” he stated.
“The quarrying industry’s support of regulatory enforcement would go a long way towards reversing this cycle, while also improving the productivity and competitiveness of Australia’s construction industry.”