What's the construction crisis in Victoria?

What’s the construction crisis in Victoria?

When Victoria's new Premier Ben Carroll took the reins last week, one of the first things he did was announce a Royal Commission into the state's construction sector. It follows months of pressure to investigate alleged corruption inside state government infrastructure projects - the ones paid for with public money. So in this Squiz Shortcut, we’ll take a look at:

• What the allegations are 

• Why there’s been pressure for an inquiry

• And what the Victorian Government hopes a Royal Commission will achieve…

🙋🏻‍♀️ This newsletter was written by Anna Pykett and Larissa Huntington

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Squiz the Shortcut

Tell me a bit about Ben Carroll…
He was Victoria’s Deputy Premier until last week when he was voted into the top job after Jacinta Allan resigned. He’s wasted no time telling Victorians he’ll be a different kind of leader, quite literally saying "I am not Daniel Andrews and I am not Jacinta Allan".

Why the distancing?
They're the last 2 Labor premiers of a state that Labor has run for 12 years. Support for the party has dropped significantly in the polls, so Carroll’s got a big job ahead of him to turn around that around, and not much time to do it - the next election is on 28 November.  

Why was the Allan Government under pressure?
There were a number of reasons, but a big one was that Allan was resisting calls to hold a Royal Commission into the state's Big Build infrastructure program amid allegations of corruption. Many of those projects were delivered while she was Premier, or while she was Transport and Infrastructure Minister before that.

What is the Big Build?
It's a multi-decade, $100 billion construction program made up of new roads, railway stations and tunnels. Its official website says it's delivering more than 180 major road and rail projects, with more than 20,000 people employed across them.

Whose idea was it?
Allan’s predecessor Daniel Andrews announced it back in 2015, and it's been described as a signature pillar of his time in office. It started with getting rid of level crossings - that's where a railway line and a road or footpath cross at the same ground height, which were deemed as dangerous. From there, it grew to include huge schemes to expand the state's rail network, like Melbourne's Metro Tunnel and the Suburban Rail Loop. That's a 90km underground line aimed at moving people around Melbourne's suburban fringe more easily.

How did the costs go?
In a nutshell, they blew out… by a lot. The first 2 stages of the Suburban Rail Loop alone could top $125 billion - meaning a single project inside the Big Build could cost more than the entire program's original budget.

Can Victoria afford that?
That's the big debate. Victoria has the highest debt of any state or territory, and a report a few weeks ago from credit ratings agency Moody's found the government is on track to spend $1 in every $10 of revenue on debt interest.

Is that unusual?
Governments getting into debt isn't unusual - it's how you get out of it that matters. The Australian Financial Review reports that generally means selling assets over time, and whether Victoria has assets to sell is an open question, which is why the conversation has turned to potential federal bailouts.

What does the Victorian Government say?
It blamed inflation, supply chain disruptions and rising labour costs for the blow out. But some experts say there were other factors at play - which brings us to the CFMEU.

What's the CFMEU got to do with it?
The Construction, Forestry and Maritime Employees Union represents members across construction, manufacturing and shipping, and its Victorian branch had a hand in many Big Build sites. It was also a registered member of the state Labor branch and donated a lot of money to the party during the 2022 state election.

So what went wrong?
Back in July 2024, the Nine newspapers revealed the union had been infiltrated by organised crime figures and bikie gangs. Victorian CFMEU boss John Setka quit after 12 years at the helm, and the Federal Government placed parts of the union under administration - meaning outside officials, not union leaders, now run it.

Did anyone investigate?
Yep… after SMH and The Age journalist Nick McKenzie's reporting made waves around the country, the Queensland Government launched an inquiry. The union's administrator also asked integrity expert and barrister Geoffrey Watson SC to lead an independent report into allegations of criminal conduct, corruption and systemic violence in the union's branches.

What did he find?
His report - called Rotting from the Top - said the union essentially controlled which subcontractors and labour hire companies were allowed onto major construction sites, including Big Build ones. He also found evidence of financial crimes, sexual exploitation, and sites being used as drug dealing points. In terms of money, Watson reckoned as much as $15 billion might have been wasted on these projects - but he said he couldn't get to the bottom of everything that happened in the way a Royal Commission could.

Remind me what a Royal Commission does?
They're Australia's highest form of formal inquiry - they collect evidence, hold public and private hearings, and recommend changes to laws or policies. But the government of the day isn't compelled to act on those recommendations.

How did Allan respond?
Her government disputed the $15 billion figure, but she asked the Labor leadership to remove the CFMEU's construction wing from the party and acknowledged criminal activity had taken place. In an op-ed in The Age at the beginning of July she apologised, saying Victoria Police had been given stronger powers and had "now laid more than 90 criminal charges".

Did that settle things?
No… We don't know how much the government knew, and there's no evidence Allan personally approved any corruption, but the state opposition kept pushing for a Royal Commission - and she resisted right to the end.

So why did she go? 
Her popularity kept sliding, and last week she was more or less backed into a corner and resigned. Charges being laid didn't change the fact that billions of dollars had been lost and, for many people, no one had been held responsible.

What’s Carroll got planned?
Within hours of being sworn in, he said his government would go "in a new direction" on integrity, community safety and the economy. He promised every dollar spent would be "treated carefully, responsibly, and only where it delivers the greatest value to Victoria and Victorians".

And the Royal Commission?
He announced one into the construction sector to examine how bikie gangs and organised crime apparently came to operate inside the Big Build. He also said the state's anti-corruption watchdog will get stronger investigative powers.

When will it start?
Carroll wants it up and running before November's election. Previous Victorian Royal Commissions have taken more than a year, so it could well be in its early stages when Victorians head to the polls on 28 November.

Will he front it himself? 
He says he'd appear as a witness if called, and that the Royal Commissioner should question everyone they believe had a role. He's also promised a "completely independent process".

Who else might we hear from? 
Victoria’s Coalition leader Jess Wilson has put out proposed terms of reference and is adamant her party won't support terms devised by Labor alone. She wants the inquiry to pin down who knew what, and says Daniel Andrews, Jacinta Allan and union figures should all be questioned.

What would make this one different?
A piece in The Conversation earlier this week argued that inquiries into the construction sector need to do more than focus on individual criminality. Its point is that the system itself creates the openings.

Just explain that a bit more…
Enterprise bargaining - the negotiation process between employers, employees and their representatives - requires unions to bargain site by site or company by company, so officials often deal privately with developers allegedly linked to organised crime. Unless that system is overhauled, along with safety and democratic accountability inside the union, some critics say that whatever this Royal Commission uncovers will likely happen again.

Where to from here?
Carroll's main opponent is Coalition leader Jess Wilson, who's been doing okay in the polls. One Nation is also on the rise in Victoria, and after strong showings in the South Oz election in March and the Farrer by-election in NSW in May, it's expected to play a key role in November.

So where does that leave Labor in Victoria?
Some reckon a fourth term will be an uphill battle. Carroll has to unite his party and present it as an effective government if he wants a shot at convincing voters in November. And the result goes beyond Victoria - federal politicians will also be watching closely for what it says about which way the wind is blowing.

Onto our Recommendations

Reading: This article (paywall) from the Sydney Morning Herald and The Age journalist Nick McKenzie, who’s spent years investigating all of these allegations of corruption - it explains all the findings from the independent report from Geoffrey Watson SC that we mentioned earlier…

Reading: And I’ve got an explainer from The Guardian that breaks down some of the key questions surrounding this whole saga - things like how much did the government know and what comes after a Royal Commission…

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