Fed: Professor says Econtech report essentially flawed

AAP General News (Australia)
08-23-2007
Fed: Professor says Econtech report essentially flawed

EDS: Story embargoed until 0001 AEST, Thursday, August 23

By Denis Peters

CANBERRA, Aug 23 AAP - An economic analysis on the work of the Australian Building
and Construction Commission (ABCC) and its clampdown on the building industry was based
on flawed principles, a union-backed review has found.

The Econtech report, released last month, found the Australian economy had been the
big beneficiary in the clampdown on building industry strife.

In a case study, Econtech found a 10.7 per cent difference in costs in commercial building
compared to domestic residential from 1994 to 2003 had dropped to 1.7 per cent in 2007.

It said the gain in labour productivity over the same periods was estimated to be 9.4 per cent.

The Econtech report said GDP was 1.5 per cent higher than it otherwise would be, while
the cost of living was 1.2 per cent lower than it would have been, with a $3.1 billion
flow on effect to consumers.

In response, the Construction, Forestry, Mining and Energy Union commissioned Newcastle
University professor of economics William Mitchell to examine the cost differentials methodology
used in the report, titled Economic Analysis of Building and Construction Industry Productivity.

Professor Mitchell found that the report was flawed in the way it compared costs in
what it termed commercial construction and domestic construction.

"The first major criticism of the Econtech analysis is that it fails the basic test
for research quality - it fails to be transparent in its method and the results it presents
are incapable of replication," Professor Mitchell said.

Prof Mitchell used what he described as a more transparent and objective method for
estimating the cost differentials between the two sectors.

"The resulting estimates are substantially different from those published by Econtech
yet are consistent with trends in other cost data published by the Australian Bureau of
Statistics," he said.

"I conclude that the lack of transparency in the Econtech analysis and the impossibility
of it being replicated by a third party is evidence of poor research quality.

"Using transparent (though qualified) methods, which are capable of replication, I
can find no evidence to support the stark results presented by Econtech.

"I have also found no evidence to support the hypothesis that a sudden 'event', postulated
by Econtech to be the introduction of the Work Choices and the creation of the Australian
Building and Construction Commission, has altered the time series behaviour of the underlying
data."

AAP dep/sb/cp

KEYWORD: WORKPLACE ECONTECH (EMBARGOED)

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