Flammable cladding removal to cost “many, many billions of dollars”

The Victorian Government’s $600 million funding package to remove dangerous flammable cladding has been labelled inadequate by consumer advocate Anne Paten, who claims the rectification costs will be “many, many billions of dollars”:

Consumer advocate Anne Paten, from the Victorian Building Action Group, said the $600 million funding package would not come close to fixing the state’s cladding issues.

She told ABC Radio Melbourne the real cost was “many, many billions of dollars”.

“The people who have already been damaged and the taxpayers who’ve had nothing to do with this are going to give this token amount,” she said.

“And on the other hand, the people who caused it and should have to give and live up to the warranty that comes with the building once again walk away scot-free.

“We need enforcement of the laws and regulations that exist, and we need penalties when people ignore those laws.”

Too right. This whole fiasco is a microcosm of what is wrong with Australia’s rentier population ponzi economy. Here we have private developers making-out like bandits and privatising the massive profits from development, while the costs are socialised.

Rather than throwing taxpayer money at the problems caused by dodgy development, the Victorian Government should launch a sweeping royal commission into the state’s construction processes, regulations and standards. This would identify the failures, finger those responsible, and help prevent a reoccurrence in the future.

Unconventional Economist


  1. >” the Victorian Government should launch a sweeping royal commission … finger those responsible”.
    Those responsible donate freely to both sides of politics. The current mayor of Melbourne is among the “those responsible” group.

    This is why Australian real-estate will never crash. Those who make the rules will do everything they can to prevent it.

  2. On top of actual rectification costs, the loss of trust in the system (for instance via higher insurance premia, increased due diligence for buyers etc) will cost hundreds of millions more.

  3. government should only pay for removal not for replacement, if owners want to put something else they can pay for it, otherwise building should be left without any …

    • Why not think laterally, keep the cladding in place, and just put an external fire sprinkler system on these buildings?

      • Probably because the waterproofing is also shoddy and a sprinkler will cause more problems if it’s ever needed.

      • Think of the water ingress issues caused by the shoddily installed leaky sprinklers. Those buildings that didn’t go up in flames would develop concrete cancer, crack and fall to the ground before you could say “Quick, lets phoenix the company to avoid warranty claims”.

    • No mate , government shouldn’t pay a cent. Property investors are all ready getting a subsidy via NG. They can just add the extra cost onto NG. ALL investment comes with risk and this is no different.
      Houses for homes, not investments. ✊

    • SnappedUpSavvyMEMBER

      these buildings are so badly built the napalm cladding is probably structural

  4. Should be like mining…

    Want to build a mine? That’s fine – pony up the rehabilitation bond upfront, as part of the approval process.

    That way, if you screw up, or the mine goes bust, the govt at least has several tens or hundreds of millions of dollars to clean up your mess.

    Something similar should be required of building developers.

    Push up the cost of development? Too bad…that’s part of a good market pricing things appropriately. As H&H said: there is too much of bandits privatising the profits and socialising the losses, screw-ups, etc.

    • Cue howls of protest from Harry and the crew. The cost of units for consumers will go sky high!

      (Think of the children!)

    • Great idea BUT, Oz already has $bills of underfunded mining /processing site rehads. Eg. Morwell open cut has $50 mill in bonds, estimated cost $ 1/2 bill.

      Current Palmer court case is how BHP gave it to him so they could run away from $1/2 bill rehab, worker payout costs 😡

    • Surely the brief response to the building industry whingers about the levy should be “catch and kill your own then”

  5. The development was not “dodgy” – the flammable cladding complied with most state’s regulations.

    It is the regulators who are at fault, not the builders. Sadly one cannot see these regulations, without dropping in the order of $10,000 as they are have been privatised.
    SAI Global has been the exclusive distributor of all Standards Australia standards since 2003.

    • The cladding wasn’t compliant for exterior use it was for indoor use. The builders/developers in a lot of cases substituted the specified cladding with a cheaper version that had incorrect/falsified specification documents saying the cladding complied. The builder/developer substituted the cladding to increase their profits on the build. This is not in every case but a hell of a lot of them.

    • Cladding was not meant to be used for buildings over a certain height, but under that height, it was fine (well in theory).

      • The contradictions in the above comments are a microcosm of the issue. No one seems to be able to explain what went wrong. Now why would that be I wonder….?

  6. ErmingtonPlumbingMEMBER

    Hello,…Ermington Plumbing AND Cladding.
    Mustafa speaking.


    • Jumping jack flash

      underrated comment!

      Government could spend up on this and pass it off as stimulus – like the pink batts.
      We could end up with more flammable cladding than what we started with! Ooh the possibilities. The mind boggles!

      That’s a nice little racket right there:
      We have a massively distorted housing market due to the trillions of debt dollars plonked into it.
      This results in watering down of building standards to build as quickly and as cheaply as possible to try and catch some of that debt wad.
      The economy goes to the proverbial from the stress of the trillions of debt dollars on it, and requires government stimulus.
      The shoddy buildings start falling down, catching fire, etc
      Government implements huge stimulus spending to rectify the issues, creating jobs and growth!

      Its just so perfect!

  7. It does appear that our governments are unwilling to use the legal system to compel those that profited from development to cover the rectification costs. There are already plenty of laws in place, we just need to prosecute a few of the worst offenders and let it be seen that they got 20 year jail sentences. Do this and the rest will stop talking about government bail-outs and start to take there responsibilities seriously, nobody wants to end their life rich on paper but dead in jail.

    • Ronin8317MEMBER

      The government won’t sue them, since it’s bad form to sue your future employer.

    • darklydrawlMEMBER

      This!! So often we don’t need “new laws” – we just need the existing ones enforced. I am ashamed (although not surprised) at how spineless our Goverment turned out to be with this issue. It also opens a huge can of worms. What other investment losses/risks are the Government also going to cover?

  8. LOL I called it a while back, a flammable cladding removal led economic recovery. Boom times ahead! Property to the moon!

  9. haroldusMEMBER

    I’m just wondering:
    i) Does this qualify as agile and innovative?
    ii) And could we extend the Grocery Code of Conduct to somehow cover this. I think it’s generally acknowledged that the GCoC is the pre-eminent piece of public policy in the last few decades.

  10. SnappedUpSavvyMEMBER

    Seems like there is caste system in Australia


    • Yep. That’s how it works. I alternate between sadness and rage when I think about it.

    • Australians
      … People of minority faiths.
      .. Indigenous needs.

      .. Opinions of white males..

      • easy there fella, you included white males on your list, that’s bound to offend someone somewhere.

  11. reusachtigeMEMBER

    Hopefully the government will step in and pay for the lot of it and also cover certifier insurance for them.

  12. Seems Anne Paten is lobbying for more money. I mean if the government is going to bail out these people, then why wouldn’t you try and get as much money as possible out of them. She is right that this will run into the billions, but having taxpayers who are lacking education, transport and health infrastructure to cough up a bottomless pit of money for developers would be morally reprehensible in the past, but seems to be status quo now.

  13. Simple suggestion:
    1. Immediately rectify all dangerous buildings. Remove and replace defective cladding.
    2. Prosecute all developers (those still in existence) involved in the roll out of the defective buildings. The fines levied should equal the amount of costs for rectifying each developer’s contribution to the problem, plus interest. This extinguishes part of the taxpayer expense.
    3. If possible (I doubt it) find those behind the companies that created the bad buildings but have disappeared (ie. phoenixed) and apply whatever penalties are possible to ruin them forever and recover as much money as possible. Name and shame too.
    4. For buildings where the developer wasn’t able to be held accountable, claw back every dollar of any capital gain on any sale of an apartment that was used as a PPOR that occurs until that owner’s portion of the rectification costs are extinguished. No profit, no contribution.
    5. For apartments bought as investments, not PPOR, full liability for costs for the owner in the event the developer cannot be tapped.

    • Godd suggestions but we’ve been talking on Macrobusiness about flammable cladding for probably over ten years now. We’ve all known it’s only a matter of time before we hear about towers of dogboxes going up in flames if nothing is done. And nothing was done. Of course I’d like to see developers and regulators pay, and anyone else in the chain who enabled these buildings to go ahead, but in the end, isn’t it the fault of the government who did not enforce the regulations? They had plenty of chances to clamp down at the time of building, but didn’t bother.

      In the same vein, it was the government who enouraged Chinese developers to build and market to the overseas investors. Can these developers be found (and prosecuted) now? No doubt most, if not all, will walk away scot-free.

      It will always be the government i.e. you and I who have to foot the bill for ineptitude.

      • Massive moral hazard if those who made dud investments are kept whole. The pain has to be shared and fall hardest on those who actually contributed to the situation.

    • McPaddy. Well…yeah. I guess. But first you’d actually have to want to if you see my point

  14. AnthonyMEMBER

    I am a Quantity Surveyor, we are working on about 7 buildings where we are replacing cladding $600m is no where near enough
    The scope of works can include
    1- Site establishment such as sheds, lunch rooms, temp fencing (if your in the city or main road water barriers to divert traffic/ pedestrians possibly also gantry to protect people walking underneath, protection off near by windows etc
    2- Access either scaffold/ boom or swing stage
    3- There may be existing structures that need to be removed & reinstalled to allow the work to be completed such as bike sheds also if there is a road that needs blocking off traffic management.
    4- Demolition of existing cladding, this may also include the framing system & insulation that will depend on the individual building (on most off our project we)
    5- Installation off new framing, insulation & sarking
    6- Supply & install new cladding incl. flashing & cappings (cost will depend on product used)
    7- If there are any services in the cladding these will need disconnecting & reconnecting (such as external lights or fire sprinklers)
    8- Builders prelims
    9- Construction contingency
    10- Project costs these will include consultants fees, authority costs to block off roads, building permits etc
    Also unless 2 projects are exactly the same you cant use $m2 rates because all buildings are different and the larger facade area to replaced fixed costs like access can be apportioned across a larger area bringing down the $m2 rate compared to a smaller area.


  15. [email protected]’ Hell, my cistern just cracked & is only 5 years old & leaking like a siv. Does this mean Danial Andrews will pay for the replacement? Seems only fair, I didn’t know it was a shoddy cistern! Oh & my crap fence that is made of sh!tty chinese steal, can big Dan fix that up for me? Oh & also my useless TV needs replacing, how about it Dan, surely not my fault I bought a dodgy TV? Oh & while you’re chucking taxpayers money around can you get my useless NBN to actually work………..?