The cost of remediation to deal with Australia's building crisis could top $6.2 billion, according to independent research commissioned by the Construction, Forestry, Maritime, Mining and Energy Union (CFMEU) and conducted by Equity Economics.
The report said this multi billion dollar bill to rectify defects in residential apartments across Australia is "conservative" as it only includes buildings constructed in the past 10 years.
This figure can be expected to double when accounting for previous decades of construction, the report said.
Entitled 'Shaky Foundations: the National Construction Crisis’ the report said more than 3,400 residential apartment buildings have combustible cladding.
“In the medium term there will be the cost of remediation, estimated to be $6.2 billion and ultimately a loss of confidence and therefore value in the nation’s biggest asset class,” the report said.
“The scale of failures in the construction industry are staggering. Australia's construction industry has reached crisis point.”
The report said an estimated 1411 residential apartment buildings in NSW used potentially combustible cladding, including 95 "extreme risk" buildings. In Victoria, 1069 buildings have cladding, the report said. Of those, 72 have been deemed as extreme risk, and 504 are high-risk.
Construction in the Australian economy represents around of 11% of Gross Domestic Product (GDP) and employs almost 1.2 million people or just over 9% of the workforce
“The importance of property in this country becomes even more stark when we look at it from a wealth perspective, where housing makes up roughly 61% of household net worth,” the report said.
“There are a variety of ways governments can help to ameliorate these impacts. This can include appropriate financial support such as the $600 million package announced by the Victorian Government for removing combustible cladding or reducing its associated risks.
“Such support can be justified by the tax revenues generated off-the-back of past activity and a recognition that these property owners are victims of a system which government has allowed to arise through poor regulatory oversight.”
The total value of new apartment commencements in 2018-19 was $31.7 billion, 14 per cent of the building and
construction sector.
Some steps have been taken in the past month to address the crisis. For example, a new agreement by the Building Ministers Forum (BMF) to implement a national approach to reforms is a major step forward in addressing poor building outcomes and restoring community confidence.
The BMF has agreed to develop a national framework for the 'consistent' implementation of the Shergold Weir recommendations.
The new national approach will see an expanded role for the Australian Building Codes Board (ABCB), and the implementation team will include both government and industry representatives.
It will also examine potential changes to the National Construction Code (NCC).
Consultation outcomes will be reported back to the BMF by September 2019.