Turnbull government secures ABCC – but suffers sudden defeat on backpacker tax

The Turnbull government has finally passed its signature legislation to restore a tough watchdog in the construction industry – the Australian Building and Construction Commission (ABCC).

After the government threw every effort into getting the ABCC through – accepting a slew of crossbench amendments, granting other concessions, and horse-trading on unrelated issues – the Senate on Wednesday morning voted 36-33 for the legislation.

But, immediately afterwards, the Coalition had a surprise defeat on its proposed 15% backpacker tax rate, with the Senate supporting by 35-32 Labor’s amendment for a 10.5% rate.

The government says it will not accept this. Unless it or crossbenchers blink, the rate will default to 32.5%, again throwing uncertainty over seasonal agriculture.

One Nation’s Rod Culleton broke ranks to vote for the Labor amendment despite Pauline Hanson having proposed 15%, which the government believed had been set to pass. Jacqui Lambie, Liberal Democrat David Leyonhjelm and Derryn Hinch also joined Labor and the Greens to vote for the 10.5% amendment.

The ABCC is the second leg of the government’s industrial relations legislation, a package used to trigger the double-dissolution election. The other leg, to strengthen trade union governance, went through last week.

Securing the ABCC vote allows Malcolm Turnbull to finish the parliamentary year this week able to say that he has achieved some major legislation. Apart from the industrial relations measures, the parliament has passed the government’s superannuation changes and significant budget savings.

But the policy cost of getting the ABCC through has been substantial, in terms of weakening the original legislation and on other fronts.

The government has had to agree to eliminate the retrospective aspect of the legislation. It has grandfathered until 2018 the requirement that companies wanting government contracts have to bring their enterprise agreements into compliance with the new building code. Originally, the legislation said any agreement concluded since April 2014 would have to comply.

It has also agreed to new procurement requirements across government to promote the use of Australian-made products.

The government will bring in from March revised Commonwealth Procurement Rules. For procurements above A$4 million, the economic benefits to the economy must be considered, although Finance Minister Mathias Cormann said the requirements would not be mandated.

A labour requirement, successfully moved by Labor although opposed by the government, will strictly limit the use of foreign workers on building sites.

The ABCC legislation was supported by One Nation senators, the Nick Xenophon Team, Leyonhjelm and Hinch. Labor and the Greens opposed it – Lambie was the only crossbencher to do so.

On Tuesday, Turnbull cleared a key obstacle with Nick Xenophon when he agreed to a stronger monitoring regime for the Murray-Darling Basin Plan.

The plan will be a standing item at every meeting of the Council of Australian Governments, and there will be special regular Senate estimates hearings on it. Xenophon had said the water issue must be addressed before he voted on the ABCC.

The ABCC legislation creates higher penalties for unlawful action and creates specific offences for the industry. Maximum penalties for individuals will go from $10,800 to $36,000 and for bodies corporate from $54,000 to $180,000.

The ABCC was established by the Howard government but scrapped by Labor. Its restoration has been bitterly fought by the Construction, Forestry, Mining and Energy Union.

The Business Council of Australia said: “Four royal commissions over 40 years have provided unassailable evidence that the building and construction industry needs its own regulator. We are pleased the Senate recognised the inadequacy of current arrangements and took action to fix this problem.”