Senator MILNE (Tasmania) (10.15 am)-I move:
That the following matters be referred to the Economics References Committee for inquiry and report by 31 March 2010:
(a) a reconsideration of the committee's findings in relation to Australia's Mandatory Last Resort Home Warranty Insurance Scheme, in light of:
(i) the 2008 Federal Ombudsman's report that demonstrated that last resort home warranty insurance is the worst performing insurance in the nation,
(ii) the Essential Services Commission's review of the Victorian Domestic Insurance Scheme which demonstrates that there is virtually no benefit to anyone other than the insurers and their brokers of this insurance product,
(iii) evidence to these inquiries which demonstrate that the Senate's conclusions were based on information now shown to be wrong, including the fact that the Senate estimated that less than 10 per cent of builders provided securities whereas 44 per cent of those in Victoria have done so since 2002,
(iv) the lack of competition in the market which is now down to three insurers, and
(v) the questionable legality of the deeds of indemnity, bank guarantees and securities demanded by insurers as a condition of eligibility for warranty insurance;
(b) any reforms which may lead to appropriate consumer and builder protection and improved housing affordability; and
(c) any related matters.

I am at a loss to understand why the government and opposition, as has been indicated to me by both of them, will not support this motion of reference back to the Senate Economics References Committee for a one-day hearing to reconvene the inquiry we held in order to review the evidence and the conclusions the committee made previously. I find it extraordinary because of what I am now going to put on the record. Something is about to happen, and when it happens I do not want to hear from the government or any member of the coalition that they did not know it was going to happen. I do not want to see them wring their hands. We are aware that by the end of November, CTU insurers and, by the end of December, Lumley Insurance will have withdrawn from the market for builders warranty insurance. That means that by the end of December, 25-30 per cent of Australia's builders are going to be in dire straits.

Those builders are going to be in dire straits because the law says there has to be mandatory last resort home warranty insurance. The law says it has to be in place or they cannot build. But they will not be able to adhere to the law because they have no more securities to offer. They have already provided securities to Vero and QBE insurers, who were the only two major players left in the market. The builders already have securities with them. They have no more to offer so they will not be able to build. They will either go broke or have to build illegally. Twenty-five to 30 per cent of Australia's builders are going to be in this position by the end of the year and both the government and the coalition know it but will not act on it.

What is going on here? There have been 38 inquiries into last resort home warranty insurance since 2002 and every one of them hears the same evidence. Parliamentary inquiries, one after the other, have been told that this insurance product is worthless. Tasmania has finally abolished it and that is a good thing. Every one of these inquiries hears that the best way of managing this is the Queensland system. Everybody knows that, and yet every time these committees report they are immediately swayed by the Housing Industry Association and by Vero Insurance and suddenly they go to water. It is time we heard why governments go to water so profoundly in the face of lobbying from these insurance companies.

So I want this reconvened because builders are going to be ending up at the end of the year in dire straits and will either be forced into non-compliance with the law or will go broke. The other reason why it is critical we deal with it is that I believe the evidence given to the committee was either misleading or misleading by omission. We had a lot of allegations about just how profitable this insurance is to the insurers and what a worthless product it is to the consumers. We heard that over and over again. But along came the insurance companies saying, ‘No, no, that is not the case.' Since the Senate economics committee reported on this, we have had the Victorian Essential Services Commission report.

That report used New South Wales builders warranty insurance templates and, on page 36 of the report, it is stated that the total number of claims paid between 2002 and 2008 was only 273. In that six-year period the total payout to consumers was only $9 million or thereabouts. But the total payout from premiums received each quarter from December 2005 to June 2008 was $10½ million. In other words, the insurance companies have taken more in three months than the total paid out over the full six years.

That is a good business to be in, isn't it. You earn more in three months than you pay out in six years. But it was not just the Essential Services Commission report that has come out since the Senate report. We have also had the Insurance Ombudsman's report, and it makes very clear that evidence being given by organisations like the Builders Collective of Australia was true and that evidence being given by the insurance company was not. In the ombudsman's report, in terms of commercial lines of insurance, it states that the highest rate of rejected claims, running at 45 per cent, was found in relation to builders warranty. If you have a look at the others, you find that it is a very small number. So look at the profitability and look at the number of claims that have been rejected and ask yourself: why is this product mandatory?

I simply do not understand it because, as we know, it has not been used. It has not been used when there have been collapses such as the Beechwood collapse in New South Wales and the Gumleaf Construction collapse in Victoria. If it is effective in providing redress when you have major collapses, why was it bypassed in those cases?
The government has argued previously that it has to be mandatory. My argument is: if it was worth anything, then people would go and source this insurance product. In the end, even the HIA was embarrassed into saying that they thought it would be all right if this product were made voluntary, but no, the government insists that it remains a mandatory product.

I think we have to look at who is benefiting. The overwhelming beneficiaries are Vero Insurance and QBE, with Vero being the dominant player in the market. There have been 38 inquiries which, time after time, keep coming up with recommendations that benefit this particular insurance company. I want to ask the government, when they stand up to respond to this: what is the level of Australian Labor Party investment in Suncorp-Metway, which owns Vero Insurance? I think the community has a right to know the answer to that question. Builders around Australia are asking that question. Consumer groups-CHOICE magazine-quite rightly called this junk insurance. At least the Tasmanian government found it to be worthless and abolished it.
We should be moving to a much better regime of consumer protection than this offers, but it is rolled every time. I simply do not understand why, when clear evidence is presented, governments cannot reach the obvious conclusions. In the last Senate inquiry, there was sufficient evidence to suggest that the recommendations ought to have been that we should have a national approach to this issue of protecting consumers in the face of shoddy building or builders becoming insolvent, dying, disappearing and so on, that we should move to a system based on the Queensland model of home warranty insurance and that the federal government should oversee the design of the scheme and have it implemented through the COAG process. We should have adopted a time frame for that to happen so that the new scheme would come into operation as soon as possible.

That has not happened. We do not have a national approach and guess what has happened? We now have yet more inquiries announced with, I see in media reports, a new inquiry being announced in Victoria. That was announced on 17 September this year as a result of the Victorian Essential Services Commission report.

The first thing that should happen is that the federal government should immediately move to abolish this, come up with a uniform scheme and have it delivered through COAG. Secondly, we should be making sure that the product which exists at the moment is not mandatory. If it is any good, it will be supported voluntarily. Thirdly, we should make sure that any form of home warranty insurance is included in the National Claims and Policies Database so that there is transparency about the performance of the insurance product. Fourthly, we should make sure that if any loopholes remain in Commonwealth regulation or legislation, such that home warranty insurance is exempted in any way from oversight by APRA, the ACCC or ASIC, then that legislation or regulation should be amended immediately to close the loophole.

The last time the Senate Economics Committee inquired into this issue, it heard evidence from insurers which seemed to contradict other evidence that they were making great profits and that they had a poor-performing insurance product. Now, however, with the insurance industry ombudsman's report making it perfectly clear it is the worst-performing product in the nation-45 per cent of claims rejected-and with the Victorian Essential Services Commission report showing that, each quarter, these insurers are making more than they have paid out in the whole period, you really have to ask, ‘Is the Senate going to stand for people coming before it, who know all this and who, when they are asked, keep quiet about it in order that their product, at the expense of builders, continues to be supported by being kept mandatory?'
Going back to the issue of builders, we have a situation now with securities and indemnities. This was brought up in the last inquiry. The way that the insurance companies were requiring builders to provide unlimited bank guarantees and various kinds of deeds of indemnity that lock in builders and preclude them from being able to change insurers was made very clear. You have to ask, ‘How is it possible that you can offer an insurance product and then require the person seeking insurance to put up some surety against it?' That is virtually asking the person seeking the insurance to become the reinsurer. I cannot believe that is legal. It has got to the point now where builders are so desperate and worried about what is going to happen to them by the end of the year that they have gone to court. They are trying to establish whether it has been legal for these insurance companies to require them to put up securities and deeds of indemnity such that they are now stuck in a situation where they cannot meet the law and are likely to go broke because they have been forced to reinsure.

So these insurance companies are taking virtually no risk here. They get the premium. They have the reinsurance capacity so, if anything goes wrong, they can get it back from the builders concerned. How fair is that? When you take out any other form of insurance, the insurance company does not come back and require you to put your house up as surety against that insurance. The premium reflects the level of risk. That is what you do for life insurance; that is what you do for house insurance, car insurance or anything else. If you are an at risk applicant for insurance, you will pay a premium.

As we said when we talked in this place about sea level rise around the coast, the issue is-as I have warned for years-that there will come a point, and there already is a point, when insurance companies will say that if you are at risk or have damage as a result of an action of the sea, you are not covered. That is why thousands of people around Australia are not covered by the insurance that they think they have got. This matter has been referred to the Law Reform Commission, because as damage starts to occur to houses around the coast and people find that they are not insured, they are going to find themselves in a position where they do not have the money to even demolish the house they have got-let alone get the insurance to build a new one.

The other situation is that local governments are giving out planning permission to build in areas that are vulnerable. Ultimately, insurers will not pay and the only option people will have is to sue the local council for allowing them build in the first place. I ask: why is it that these insurance companies have been able to force builders to be the reinsurers to guarantee maximum profits to Vero-which is owned by Suncorp Metway? Suncorp Metway has a substantial investment from the Labor Party. I am really looking forward to hearing the government telling us how much the ALP has got invested in this company. I will be delighted to hear if they no longer have an investment in that company. That will clear up one issue that I have in relation to findings that are always coming down from governments from one end of the country to the other.

I simply cannot understand why this parliament would not agree reconvene the inquiry for a one-day hearing, given what I have just said about builders being in dire straits by Christmas with 30 per cent of them forced into noncompliance and having to go to court to test the legality of whether the insurance companies actually can force them to become reinsurers. The inquiry would not have to take a whole lot more evidence but, firstly, review the evidence that was given by the insurance companies to see whether their evidence in relation to the percentage of claims that were rejected was true; secondly, look at the profitability, because the claims they made certainly do not match what the insurance ombudsman or the Victorian Essential Services Commission have had to say. I just want to have that evidence examined to see whether it was true or whether the Senate committee was misled.

The inquiry should then review the conclusions that the Senate committee reached, which were weak and did nothing to assist the consumer or the builders in this particular circumstances. It should also revisit the issue of whether the product should be mandatory or not. If the federal parliament could move to at least remove the mandatory nature of this product in the next month or two, that would stop these 30 per cent of builders from being forced into a position of noncompliance with the law, while we get things sorted out. That could be done in the course of a single day. That is not a lot for a Senate committee to do. It is about reconvening, examining those issues, getting rid of the mandatory nature of it and checking that this particular insurance product is not exempt from oversight by these financial oversight bodies. It is critical that the committee be able to look at it, because it is not until you get reports from bodies like the Essential Services Commission and the ombudsman that you actually find out what is going on with this product. Once we get rid of the mandatory nature, then we can move quickly into next year to start looking for a harmonised system of consumer protection across Australia. Getting rid of it in the short term would help the 25 to 30 per cent of builders who are in trouble right now.

I am not asking for a comprehensive inquiry. We have had the inquiry. I am asking for an assessment of whether evidence given to the inquiry was true, whether the conclusions were valid, whether the claims being made now are true-that 25 to 30 per cent of builders are going to be noncompliant by Christmas because CTU and Lumley, plus the one other that is in the market, will have withdrawn and we will be left with only Vero and QBE and those builders will be unable to get security.

We have had a lot of talk in this place about how people support small business. Oh yes, they support small business. If you do not support this reference you are not supporting small business in Australia; you are undermining it. Many of these builders are small to medium-size builders, and many of the companies that are contracted to them are also small to medium-size contracted businesses. You are putting the whole construction industry at risk by not re-examining this. This is not just my assertion; this is factual. This is also the claim of the insurance industry ombudsman and the Essential Services Commission from Victoria. Reject it if you choose to, but understand the ramifications. When this happens at Christmas time, come out and admit that you are the people who knowingly allowed it to happen. I urge the Senate to reconsider.

Senator HURLEY (South Australia) (10.35 am)-The government is aware of concerns about home builders warranty insurance and sympathises with the frustration that has caused some consumers and builders to make representations. The Senate Standing Committee on Economics recently held an inquiry into home builders warranty insurance, and that inquiry did hear all of the concerns that Senator Milne has raised this morning. We understand that the government is considering its response to the Senate inquiry into the mandatory last resort home warranty insurance scheme and will table its response soon.

The Senate inquiry reported on 13 November last year. Its main recommendation was that COAG and the Ministerial Council on Consumer Affairs pursue a nationally harmonised scheme of consumer protection in domestic building. That recommendation is already in place as a result of the inquiry last year.

In the meantime the government gained the agreement of the states and territories at the Ministerial Council on Consumer Affairs meeting in May this year to review consumer protection measures in the building industry, following the Commonwealth placing it on the meeting agenda. That ministerial council noted the findings of the Senate inquiry's report, and it has already agreed to refer this matter to the Standing Committee of Officials of Consumer Affairs to consider as part of the review of the harmonisation of conduct provisions for the national licensing system. Establishment of a national trade licensing system is identified as a priority within the national partnerships agreement to deliver a seamless national economy between the Commonwealth and the states and territories. This agreement forms part of the broader Council of Australian Governments' reform agenda.

Additionally, the ministerial council has agreed to place home warranty builders' insurance on its strategic agenda.
State and territory governments are responsible for regulating home builders' warranty insurance. Senator Milne asked for the economics committee to do a one-day report and then, as she said, get rid off it in the short term; but that is not a possibility. The Commonwealth does not have responsibility. The economics committee certainly does not have responsibility for those laws and regulations, and it is unable to put such a thing in place before Christmas. Having the Senate committee revisit its inquiry in which all of these issues were raised will not produce Senator Milne's desired action before Christmas.

Action has already been undertaken by the government to have this reviewed by the state governments, who are, after all, responsible for laws and regulations in this area. Therefore, the ministerial council is the most appropriate body to pursue the issues further, as it includes representatives of state and territory governments. This process will enable insurance arrangements to be considered in conjunction with broader aspects of the building industry, including licensing requirements and dispute resolution mechanisms. The Senate inquiry included those two issues specifically as something that had to be considered in conjunction with insurance. The government considers it is essential that insurance be considered in this broader context as well.
The government is also closely monitoring developments following the recent decisions of both Lumley General and CGU Insurance Ltd. to withdraw from the home warranty insurance market. In its role of monitoring the implementation of the general insurance code of practice, the Financial Ombudsman Service published statistics provided by insurers about insurance claims, including builders' warranty claims. As part of the process of responding to the Senate inquiry, the government is considering options to address issues associated with the lack of access for homeowners to effective dispute resolution schemes, as well as a lack of homeowner understanding about the product. So the government has put in place motions.

Senator Milne raised questions about the Labor Party's role in Suncorp. I have no knowledge of Labor Party involvement in Suncorp. But I would point out that it was a Tasmanian Labor government that abolished the mandatory home warranty insurance. The Queensland government-and, as I understand it, Suncorp is based in Queensland-runs its own very good government insurance warranty. We had no complaints from either South Australia or Western Australia. This is principally an issue for Victoria and New South Wales governments. Our Senate inquiry found that the New South Wales government is undertaking significant reform in this area. As chair of the economics committee during the inquiry, I did not see that there was any basis to suspect that there was any Labor government involvement in Suncorp.

So, as chair of the economics committee, I see no benefit in doing an additional inquiry, whether it is one day or 10 days. The frustrations were in evidence. We understood the frustrations. We understood the issues. We made strong recommendations, which the government has commenced dealing with. I think that there would be no benefit-beyond what the government is doing-in pursuing another inquiry. I think it would be basically a waste of time.

Senator XENOPHON (South Australia) (10.42 am)-I indicate my support for Senator Milne's motion. I think it is a very worthy motion and it deserves support. I would like to discuss both the merits and the issue of process as well.

In relation to the merits of having another inquiry, I would like to say a few things. Senator Hurley says that the Commonwealth does not have responsibility for home warranty insurance-and that is correct. The Commonwealth does not have responsibility for home warranty insurance at this time. But what is clear from the High Court's decision in Work Choices is that the sphere of Commonwealth power and the extent to which the Commonwealth can be involved in issues previously thought to be the purview or the jurisdiction of the states is quite extensive by virtue of using the corporations powers, and other powers in the Constitution. I think that, if the Commonwealth wants to have responsibility in relation to this very important issue, it ought to. I believe that in terms of state schemes there has not been a seamless national approach in terms of home warranty insurance. It has been a mishmash and a fiasco in terms of the way it has operated in various states. I note the move of the Tasmanian government to abolish the scheme, to go it alone, in a sense, with respect to this.

I think it is relevant to take into account the whole issue of what has occurred in the last 12 months since the inquiry of the Senate Standing Committee on Economics into home warranty insurance. There have been developments. The 2008 federal Ombudsman's report demonstrated that home warranty insurance is the worst performing insurance in the nation. The recent review of the Essential Services Commission in Victoria demonstrated that this scheme is fundamentally flawed. An article from insurancenews.com.au of 21 September this year states:

The Victorian Essential Services Commission has released the latest report into the controversial privatised last resort system, which once again reveals a massive disparity between the number of claims submitted and those paid by insurers.

The Victorian report reveals insurers have accepted just 273 claims from 1363 received between 2002-08, for a total outlay of $10.23 million. It's a profitable line of business, with insurers earning around $7 million in premium each quarter.

Senator Milne-It's outrageous.

Senator XENOPHON-Senator Milne says ‘Outrageous' and she is absolutely right. That is price gouging. Not only are you being ripped off on price but also you are being ripped off on service in terms of what is being covered by this form of insurance. The article in insurancenews.com.au goes on to say:

Judging by the report, the product is clearly failing to meet consumer expectations. That's having a negative effect on the industry via a stream of critical reports in the daily media.

Madam Acting Deputy President Hurley, it was not so long ago that we were both in the South Australian parliament when HIH collapsed. I remember that I was involved with a group of HIH victims dealing with their frustration with the system. The then Liberal government eventually moved to provide support for those families, but it was a very difficult time for them. The delay caused a lot of angst and a lot of heartache for those people while they were waiting to see whether they were covered.

I think it indicates that we need a national, seamless scheme with consistency of purpose and consistency of service-a scheme that actually does what it is meant to do in terms of home warranty insurance. I believe there is a lot of merit in Senator Milne's motion on the whole issue of the process. I note, Madam Acting Deputy President, in your role as Chair of the Standing Committee on Economics, you quite rightly pointed out that a comprehensive report was prepared last year and I commend the committee on the work done. I was not that involved in it-I think it was in my first few months as a member of the committee-but things have changed since that time. There have been a number of developments that indicate a need for a further review of this matter and I believe, as does Senator Milne, that we can deal with this in the course of the day. I know how busy both the Economics References Committee and the Economics Legislation Committee are, but I have confidence that we can build on the work done previously to review the recent developments and that we can at least push the agenda forward. There are many consumers around the country who have been affected by a building company collapsing and, by their having to go through the trauma of trying to claim through a very inadequately administered scheme, some good can come out of the Senate committee process.

I urge my colleagues in the coalition to consider supporting this motion. It might involve an extra day's hearing to advance the debate. I think it is inevitable there will eventually be a national scheme for home warranty insurance. When you consider the figures and what the Victorian Essential Services Commission said about the extraordinary profits made-the gouging, as Senator Milne says, and I agree with her-these are way out of kilter with anything that the insurance industry is making from general insurance. This shows there is something wrong. I am not against people making a decent profit from their businesses, but this goes beyond that. It is a case of price gouging; it is a case of very poor service. I urge my colleagues to support Senator Milne's motion. I also urge Senator Milne, in the event that it is defeated today, to keep pushing this issue because I think reform is needed. I also believe the Economics References Committee can play a useful role in advancing an informed debate in relation to the reforms that are needed for this industry.

Senator MILNE (Tasmania) (10.48 am)-I take it that the coalition is not even going to speak to this motion. It is very interesting that members of the coalition are not going to speak because it is they who run around saying they support small business. So let them explain to the builders, their suppliers and companies in November and December this year why they refused to bring this matter to a head in a time frame that would have allowed the federal government to take some action to save builders from being put in a position of building in a non-compliant way under the law or else going broke.
I want to address some of the issues that people have raised. I heard the Chair of the Standing Committee on Economics, Senator Hurley, saying that the matter has been referred to the standing committee of officials at COAG and that it is now on its strategic agenda. I am sure that the builders around Australia are enormously relieved to know it is on the strategic agenda! Things are on that strategic agenda for a decade and never get beyond the strategic agenda. COAG is the biggest black hole for inaction. If you want to make sure nothing happens, then you leave it to COAG, but if the Commonwealth decides to drive something at COAG it can do it.

It is a question of political will. If it is left to the states nothing will happen. The Commonwealth needs to drive it. Of course, it needs to be done through COAG and the ministerial council, because that is the mechanism through which the federal government relates to the states. But it should be driven by the Commonwealth and there should be the political will to do it. To say it is not possible for anything to be done before Christmas is saying that it is not possible to save 25 per cent to 30 per cent of Australia's builders from being in dire circumstances before Christmas. This is the national parliament. This is what we are supposed to be doing. We are supposed to be looking out for the interests of people.

We have Tasmanian dairy farmers in complete chaos because of what National Foods has done. The Commonwealth has no direct power to do anything about that, yet everyone is quite rightly rushing around trying to do something. You would expect parliamentarians to support people who are in dire straits. So why isn't the government prepared to put its shoulder to the wheel and help builders right now when it has the power to do something about it by driving it through COAG and the ministerial council? I have heard it said that the government is closely monitoring the situation with Lumley Insurance and CGU pulling out. What does ‘closely monitoring the situation' mean? Who is closely monitoring the situation? To what end is it monitoring the situation? What is being done to assess the fact that the securities that have already been offered cannot be transferred? That is the issue for these builders, because when those two companies pull out there will be no more securities to provide because the ones that have already been provided to Vero, QBE and other companies are not transferable. What are they supposed to do?

What is the government doing? It says it is monitoring the situation. The minister did not tell me what that means. It is like in Oliver Twist, ‘I am monitoring the situation.' Very good. I am glad they are monitoring the situation! But what is monitoring of the situation actually doing about the situation? This is the sort of thing that people in the community cannot stand: bureaucratic gobbledygook for monitoring a situation. I hope Senator Abetz can tell me what monitoring the situation means since he is not prepared to support the builders on this occasion. I would like him to tell us why he is so comfortable about the fact that the federal government is monitoring the situation. Very good. Let us see what the builders think the government's close monitoring of the situation is doing.

The New South Wales government are about to engage in significant reform. Nobody could seriously believe that the New South Wales government is capable of engaging in significant reform, and I cannot believe the coalition would think the New South Wales government was capable of engaging in significant reform. It needs to significantly reform itself before it can significantly reform anything else in the New South Wales economy. Frankly, people have lost all confidence in the New South Wales government being able to administer things in a way that is not in many ways questionable. Whilst we have the New South Wales government reviewing the situation-no doubt, closely monitoring the situation, again; no doubt, looking into it, again, being yet another government of mirrors looking into things-we have the Commonwealth, the chair of the Senate estimates committee, the Senate Standing Committee on Economics and the federal parliament saying that there is no benefit in an additional inquiry, that it would be a waste of time.
I hope every builder in Australia knows that as far as the Labor Party, the Liberal Party and the National Party are concerned it is a waste of time to consider the fact that 25 to 30 per cent of Australia's builders are going to either be carrying on their businesses illegally by Christmas or be out of business by Christmas, and the fact that they have to raise money to go to court in order to try and get some judgment about whether these companies can force them to be their own reinsurers. This is a ludicrous situation and it just cannot be allowed to continue. I really am appalled that we have a situation where the federal parliament is prepared to abrogate its responsibilities in this regard to a group of people who are the backbone of the government's stimulus package. All this money is being spent on building and construction around the country, supposedly to keep people in work, in the face of the global financial crisis and we have a ridiculous, last resort, mandatory home warranty insurance scheme putting people out of work. This is a classic case of the government failing to look at the consequences of its action: pouring money in and then letting builders build illegally. That is the situation we have at the moment. Worse still, it is forcing them to put up their own deeds of indemnity and their own bank guarantees to get insurance so that they continue to carry on their businesses.

I thank Senator Xenophon for his support for recognising what is clearly in the figures from the Essential Services Commission of Victoria and the Insurance Ombudsman that pointed out that this is a very, very poor insurance product-45 per cent of claims rejected-and that what is going on with these insurance companies is price gouging. There is no-one who could justify the fact that the total value of the claims between 2002 and 2008 was $10.23 million, yet at the same time the average premium income was $6.9 million a quarter since December 2005. How can you possibly justify that? So few claims have been paid out. In the course of the inquiry we discovered the reason for that. It is very difficult to prove that a builder has become insolvent and the insurance company just says, ‘No, they remain solvent.' Then you have to take another legal route to try and prove anything to the contrary.

This is a disaster for Australian builders and for communities, and we desperately need a standardised system around Australia of consumer protection. Tasmania started the ball rolling. This should be a two-stage process. Instead of just monitoring the situation, the government should be moving now to call an emergency meeting to make sure we abandon the mandatory nature of this before Christmas, so that the builders can build legally and then, instead of putting it on the strategic agenda for some consideration years down the track, move rapidly to get it quickly onto the national radar so that we can roll out a similar system to the one in place in Queensland.

I want to express my thanks to Senator Xenophon and my disgust at the government and the coalition for their lack of care and responsibility of builders in Australia-
Senator Xenophon-Consumers.

Senator MILNE-Yes, builders and consumers. I congratulate the Builders Collective and the work they have been doing for years and years to bring to the attention of the parliament the reality of what is going on with this junk insurance. The community already knows it because consumers are suffering. Choice called it junk insurance, quite rightly. Tasmania responded and the rest of the country is lagging behind in response. I really urge the coalition to reconsider its position because I can see chaos in the building industry ensuing by Christmas. I do not know when the Builders Collective court case will get into court. But why should a consumer advocacy group have to get to the situation of taking this matter of whether reinsurance is legal to court in order to continue their business?

For the life of me, I cannot understand why a parliament is so careless of such a significant group of people, a significant number of businesses and the whole consuming public when it comes to the issue of constructing your own home. For most families who get to the point of building their own home it is the major asset in their life. It is a failure of leadership by the Australian parliament to be so careless of this consideration in reassessing the validity of these schemes, the price gouging of companies like Vero and the failure of this insurance product.

Senator EGGLESTON (Western Australia) (11.00 am)-by leave-There is no doubt that home warranty insurance is a very serious matter in which there is room for a great deal of improvement. The facts of the matter are that there are different regimes around this country and consumers, except in Queensland and the ACT, in fact get very little protection from their home warranty insurance even though they think it means that if something goes wrong with the construction of their building then they will be indemnified and the necessary repairs will be made.

As Senator Milne said, I think, there have been 32 inquiries into this matter. So one must conclude that all the relevant facts are known about this issue of home warranty insurance and how inadequate it is in, as I said, all places except perhaps Queensland and the ACT. There are certainly a lot of issues of consumer protection that need to be addressed. However, the coalition does not believe that a further hearing will lead to more relevant or substantially different knowledge about the state of affairs in home warranty insurance than has already been revealed through the very long inquiry into this matter by the Senate Standing Committee on Economics.

The coalition believes that the time has come for the question of home warranty insurance to be referred to COAG so that common legislation can be developed which will apply across Australia and give protection to people building homes across this country. I think that, Senator Milne, is what we should do from this point on. There should be a common agreement to refer this to COAG for the COAG process to come up with, as I said, legislation which would apply across the country and provide adequate protection to people building houses anywhere in Australia.

There is no doubt that Senator Milne is quite right: it is a scandal that home warranty insurance has the flaws that it does. Home warranty insurance is in fact quite fraudulent. People are taken in by it and consumers are put at risk. But it is not really a federal matter; it is a matter for the states, and the best outcome would be to refer this to COAG for the COAG process to deal with it.