Wednesday, 7 February 2024

Environment and Planning Committee

Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works

Nina TAYLOR (Albert Park) (10:33): I rise to reflect on the Legislative Assembly Environment and Planning Committee’s report Employers and Contractors Who Refuse to Pay Their Subcontractors for Completed Works. This inquiry was very, very, very important work, and it was tabled in November 2023. I will commence by firstly thanking the committee membership. We had the chair, the member for Wendouree, and deputy chair, the member for Morwell. We also had the member for Bass, the member for Monbulk, the member for Nepean, the member for Ripon, the member for Croydon and the member for Warrandyte. I would also like to thank the secretariat. I know the incredible amount of work that goes into preparing these reports to a calibre that is expected by the Parliament, as has been delivered here. I express my gratitude to the committee, because this is certainly a really, really important issue.

I note that it was clear from the outset that the focus of the inquiry would be on the payment of subcontractors in Victoria’s construction sector. I would make the qualification of course that cash flow matters for every business, but when you think of the fact that the construction industry is one of Victoria’s largest industries in terms of its contribution to the economy and the number of people it employs, when things go wrong, as has been critically evaluated by this report, the ricochet effect can be truly devastating.

I note and echo some of the comments of the chair just earlier in the chamber, because to some extent as a result of what is apparently the hierarchical nature of this industry it is the subcontractors who typically suffer the poor payment practices. And just going a little bit further on that issue, which is really the crux of the focus here when we are looking at that issue of fairness, poor payment practices such as long payment terms, late payment, incomplete payment and non-payment – and I just want to make this further clarification – are of course experienced by businesses in many sectors of the Victorian economy, particularly small businesses. Small to medium-size businesses are twice as likely to experience problems with late payments than larger corporations, and unfortunately when you are in a smaller business particularly, you are extremely vulnerable. You do not have the backup. Who is going to back you up? It is you and the employers that you may or may not have who are relying on you as well and of course your family, mortgage, rent and all the other elements, and whatever you may owe the bank as well. We know that the consequences for the Victorian economy can be profound. They are profound and can include reduced cash circulation, employment and business growth. So the magnitude of the impact of poor payment practices, particularly those experienced by subcontractors, is certainly worthy of the focus that has been extended through this particular committee inquiry and report and of course more broadly.

I should say, this is not obviously a problem exclusive to Victoria. We know that other Australian jurisdictions have also introduced security-of-payment legislation to address these issues, because of course we know that building and construction is not exclusive to Victoria. Other states partake in these activities because they should and because it is a very important part of our economy and of building a community as well. I will put the little caveat that of course difficult economic conditions are exacerbating payment issues and contributing to a high rate of insolvencies. I think that further element is relevant when we are discussing more broadly the recommendations and also the particularly difficult circumstances and contingencies that have been explored as part of this report.

I will come back to the original point that was beautifully articulated by the chair that what fundamentally underpins the element here is a concept that I think we all should value, and that is one of fairness. You have put in a good hard day’s work, you are putting yourself on the line, you have exhibited the skills that have been expected, you have had the contract there properly undertaken and yet you are not being remunerated for the work done.