Business News - WA
At Close of Business podcast October 7 2024
All the latest business news from WA deliver daily, at close of business news briefing. Good afternoon and welcome to the out close of business podcast. I'm Sam Jones and I'll be reading a Monday headlines. Metronets long awaited Morley Allen Brook line will finally be open in December to be delivered at a confirmed cost of $1.65 billion and more than four years after approval. The train line's milestone delivery will come before the end of the year, connecting 21 kilometres starting at the recently opened Bayswater station, connecting to new stations at Morley, Naranda, Balladura, Whiteman Park and Allen Brook. The train line was the McGowan government's flagship election commitment ahead of the 2017 state election in which it won power and will be delivered in the final months of Labor's second term in office ahead of March's state election. The project was contracted to Lang O'Rourke in October 2020 with its budget pushed out by more than $500 million over the course of its construction. Addressing media while announcing the December 8 completion date, Treasurer Rita Safiotti said the project had been delivered in unprecedented circumstances. And public comment over a proposed workers' accommodation of village on Rutnest Island to house more than 300 staff has opened. The Rutnest Island Authority has proposed to build 149 units on Parker Point Road south of South Thompson. The proposed self-contained workers' accommodation units would provide housing for up to 336 workers, the RIA set on its website. Works are expected to start in late 2025 and be delivered in stages until the estimated completion of 2030. Other worker accommodation plans for the island include staff housing for lodge wagem up and for sand fire. The worker accommodation units will be leased to commercial businesses operating on the island with the state government investing $98.5 million in the 24/25 budget to be spent on staff accommodation over the next 80 years. And finally, Rio Tinto has confirmed it approached battery metals miner Arcadian Lithium over a potential acquisition as Lithium prices hover at a cyclical low. Both Rio and dual listed Arcadian confirmed the non-binding approach but stressed there was no certainty a transaction would be agreed to or proceed. Arcadian has a market capitalisation of $4.45 billion with its shares having slumped more than 60% over the past year against weak market conditions. Off the back of the news this morning the miner's share price skyrocketed more than 40% to $6 a piece while Rio shares with down 1.3% to $122 each. Rio's approach ends months of speculation that the miner was ready to make an M&A move in Lithium with Abramal floated as the other potential target. In terms of synergies, Rio and Arcadian both own assets in the Lithium Triangle of Argentina. That's all for today's headlines. You can read more at businessnews.com.au. Coming up on the podcast is going to be our subject again to discuss trends in WA's construction industry. Celebrate business leaders, entrepreneurs and trailblazers with business news events. With our flagship event series bespoke online events, webinars, book launchers and gala rewards programmes. Our forums showcase the policies and issues affecting Western Australia within industry and government. Our events are your platforms to engage and connect with the Western Australian business community. Visit businessnews.com.au/events for more information. Welcome back to our Closer Business, I'm Jack McGinn. Today I'm joined by Isabel Viero. Isabel, how are you? Good thanks Jack, how are you going? I'm well thank you. Isabel, for the most recent edition of business news you caught up with the executive director of the government's building and energy division. That's Sarge Abdulakhan. That was an interesting rate. Building and energy seems to have a bit more of a profile in recent years than it probably has in the past. There's a lot going on in that sector. Tell us a bit about the man himself and what he's up to. Yeah, so it was interesting to sit down with him. His name is put out on a lot of releases. Building and energy have been tied to a lot of high profile investigations recently with some pretty well known builders, particularly in the residential space. More on that later, but yes. Sarge by trade is an electrical engineer. He's from Mauritius and then moved to Australia. He was working in Queensland and mining for a while before moving over to WA. Thought he'd do a quick little stint in the public sector. Nice flexible hours with his family. Here's a young family. I think he's been there 16 years. That plan didn't come to fruition at all. No, it did not. It looks like it's worked out pretty well. He now wears multiple hats under the department, which includes building and energy. So he's the head of building and energy, and then there's a few. It's a very complicated structure. But he's got a lot going on. Building and energy, they used to be separate entities. The building energy side now there. One. So he's seen all of that process, that kind of merger. And quite a bit's gone on during his tenure. Laws around electrical safety is a particular point of passion for him. In the gas sector, payment protection for subcontractors, they've introduced a lot. He's had a fair bit of influence on government in this space, particularly around safety. Because building and energy, their core focus is firstly around education. Then it also gets into investigations and prosecution, which where the public interest, journalists' interest and government comes into it. But yeah, he's a pretty busy man. And he took on that position in 2019, just ahead of the beginning of the pandemic. Yes. So how was that experience being? Did he talk much about that? Yeah. He had probably a good year before things really upended one half of his portfolio at least, being the building sector in WA. The fallout from that is definitely still unraveling. There's high numbers of insolvencies tied to that. There's a lot of factors. He even talked about the state government's incentives, which was interesting to hear and talk about that. His take was that the state government had those incentives, obviously people were keen to take them on, because why wouldn't you be if you're in that position. But in terms of builders, they were put on the table. The builders didn't need to take them all. No one was forced to take them. And the builders' responsibility to manage their own work loads. And obviously, it was a big incentive. People wanted to take it up. They wanted the work. But in hindsight, we've seen how that unraveled. Particularly a lot of those fixed price contracts signed in 2020. We've had a slew of issues since. And a lot of that work has not been prioritised, which is leaving homeowners waiting up to four years, and they still don't have a house to live in. Right. And part of the reason that happens is because there's fixed price contracts that are not necessarily as lucrative as more recent contracts. Is that what happens? So that was a big point that we talked about, which is, yes, that is what happens. So it's more profitable to sign work now. We're at much different prices and prioritise that work, rather than the work in 2020. Because some of it, not necessarily, but it could screen that's lost making. They're not making the same margins as they are with the contracts for the past couple of years. So we are seeing a little bit of that. One builder in particular, where it came out and caught that that was the case, was the hearings of niche living, which has been a very high profile case. Building and energy investigated them. They made a recommendation to the building services board, which was that they refused to renew the entity behind niche living's building registration. So that happened. It rendered niche living unable to sign any builds, complete any work. They're rendered useless, really. Then niche took that decision to the state administrative tribunal to try and get that decision thrown out. And they have temporarily succeeded in that. So the matter will stay with, it's going to continue. So for now, they can continue to build, which they are doing. But during the hearings, which attracted many journalists, because it's a very interesting case, we heard about how they prioritised more profitable contracts. And particularly the lawyers for the building services board were saying that essentially they took on four years' worth of work in a couple of years' period, which they were really raising questions about their capacity to manage their own workload. And I was talking to Sarge about it. He was like, it's not an issue broadly across the sector. He said, there's a few people who are doing it. And yes, that's problematic. And he sees that as where building and energy can come in around education. He's saying, the bigger end of town, obviously, don't need their help. They've been managing their workloads successfully for a long time. But it's become quite evident that the smaller players do not have that same capacity. They're not doing it the same way. So that's where the education theme of building and energy he sees is really important from a proactive standpoint. Yeah, so there's a support mechanism in place, so that they can put in place to help the builders there. And that's not specific to niche. That's across the industry. We were talking more broadly, yes. Yeah. So you've also compiled a little snapshot of building complaints in WA, which is fascinating reading, because obviously, and we know about some of the challenges that have been faced over the last few years, we know that there are people who are still waiting for their homes and whichever builder they're building with, you just hope that these people can get into their homes sooner rather than later. But what are the stats actually tell us? Yeah, so basically building complaints, the way that building an energy compilot, are broken down into a few categories, and being the total, the big number that we see, which really kind of spiked post pandemic. And then it's broken up into building services, complaints around like workmanship, not doing such a great job. And then contract complaints, which is, you know, maybe they've had delays and this, that and the other. And so what Sarge was saying is that when you, for this year, when you're really breaking the numbers down in the context of the 15,000 annual home builds that take place in Western Australia, the numbers really weren't that alarming. So in 2023, the total number of building complaints was over 1100. And so far, this year, so pretty much as of towards the end of August, they were sitting around just over 700. So they are starting to trend downwards, particularly with the contract complaints, which those numbers, they did peak after 2020. So in 2020, there were 60 complaints, 2021, which is like the work kind of, you know, you see a year later, jumped up to 200, 250, 370, and so far this year, it's 185. So he was saying, when you really break down the numbers, they're not as alarming. He was saying, you know, some people are saying the wheels are falling off. He says, not the case. We also spoke a little bit about insolvencies, which he really stressed as well, that those numbers weren't as alarming as they may seem. So pretty much there was a peak of 32 insolvencies in the 2020, 2024 financial years they counted. And that's up from 27 insolvencies, the period before. So far, this financial year, three builders have hit the wall. He was saying that, you know, every case when a builder goes under is unfortunate. The repercussions for homeowners is horrible, and he's like, heart goes out to them. You know, there's a big flaw in effect anytime it happens. But he said, he just wanted to highlight that 32 insolvencies isn't really an alarming number in terms of the amount of builders in WA. And he said, again, brought up that education piece both for builders, but also for consumers to be doing their, you know, their research before they sign. And yeah, again, reiterating that point that, you know, the onus is really on the builders. Because I was saying, you know, when some of these builders go bust, we read the reports that come out afterwards, a lot of them point to the state government incentives and other issues for why they went under. And he was saying, like, yes, that's all part of it. But, you know, they didn't have to take them up, which is interesting to hear him talk about. Another thing that he raised was the state's decarbonisation and energy transition goals. Okay. And building an energy's role within that. He said, you know, as this space really starts to take shape as a department, they've got to be ahead of it. And he was saying, you know, they need to ensure that legislation and building standards remained agile so that they don't stifle investment, they don't stifle progress. But at the same time, particularly as the regulator, they need to be making sure that this legislation is adequately in place. So to ensure that everyone's safe, you know, it's very important role. And so he was saying, all this areas, you know, renewable energy, micro grids, you know, electric vehicle charging infrastructure, they all have a hand in this as the regulator. And they need to make sure that their laws remain contemporary. And then also on the building side of things, it's around efficient energy efficient home builds and things like that. So it's just interesting to hear him talk about, you know, their role within this. And I think it's definitely going to be a focus point for putting energy in the future. Yeah, that balance between progress in terms of, you know, new infrastructure and things that you're rolling out, but making sure that the regulations are keeping people safe is a huge one. And that's probably going to be an emerging theme across the state. So Izzy, you've done a really good job with this pace. Really enjoyed reading it. Our listeners can find it in the most recent edition of business news. Thanks so much for joining me today and sharing your insights and have a great day. Thanks, Jack. The latest business news, deliver daily, subscribe and rate the show. Where have you listened to your podcast? For all the latest business news, visit businessnews.com.au.