Victoria to Fund Cladding Rectification Works

The Victorian government has announced a $600 million package to help fund the rectification of at least 500 buildings with high-risk cladding.

The cladding rectification fund will be administered by a newly-formed body, Cladding Safety Victoria.

Premier Daniel Andrews called on the federal government to meet halfway to cover costs. The request for a “national partnership” was swiftly rejected by treasurer Josh Frydenberg on Tuesday.

“The problem with cladding has come from a lack of compliance and enforcement at a state level,” Frydenberg said.

"So, I say to the states, look in your own backyard, make sure it's fixed.

“We're not picking up the bill for what is a state responsibility.”

Andrews said that the $600 million fund should foot the bill for the “full rectification” of the 500 buildings that fit into the most dangerous categories.

The figure may fall short of modelling by RMIT last month, which estimated that the bill to replace combustible cladding could run into billions of dollars.

“The ultimate figure will depend on the cost-efficiency of any rectification program and the risk level and size of the 629 buildings known to be affected,” authors Simon Lockrey and Trivess Moore said.

“Our modelling produced cost estimates between $250 million and $1.6 billion.”

Andrews said he wouldn’t rule out the potential that the cladding rectification task could exceed $600 million.

Crisis of confidence as insurers flee

The news comes as states and territories come under renewed pressure to work together to overcome a crisis in public confidence in the building industry.

The recent evacuation of three Sydney apartment blocks and safety fears over combustible cladding has sent insurance premiums skyrocketing.

Master Builders chief executive Denita Wawn warned that insurers are “walking away”, and the insurance crisis has the potential to bring building activity to a halt.

The NSW, Victorian and Queensland governments have proposed allowing building certifiers to continue to practice without insurance for cladding-related claims to deal with the issue.

Related: Urgent Call for Action on Building Reform

The announcement on Tuesday coincided with the release of the final report from the Victorian Cladding Taskforce, which warned that the construction industry could “grind to a halt” if insurance concerns aren’t addressed.

The taskforce, led by former premier Ted Baillieu, said that the government should explore fall-back options for providing professional indemnity insurance.

“If building surveyors are unable to practise as a result of an inability to obtain insurance, the construction industry could grind to a halt.

“It is therefore reasonable to grant an exemption allowing exclusion of cladding-related claims in professional indemnity insurance until the overall issues around insurance can be resolved.”

The taskforce has also identified fifteen high-risk buildings that will have their cladding fixed in coming weeks.

Of the 2,227 buildings audited, 1,067 were found to have combustible cladding. The state-wide audit found that more than 50 buildings have required immediate work to prevent evacuation.

“This isn’t just about safety, it’s about fairness for people who bought apartments in good faith and were let down by dodgy builders or dangerous buildings products,” planning minister Richard Wynne said.