Scott Buchholz (Wright, Liberal Party) Share this | Hansard source

I have changed horses. Before I digressed, I was looking at conflicting views between Treasury and the industry. This is an exchange between Anthony McDonald of Treasury and Peter Verwer, Chief Executive, Property Council of Australia:

Mr McDonald: I am not aware; there probably would be. But in this instance, to the extent that we would have allowed for any reduction in this sector as a result of the budget measure, it would be fairly minimal.

Fairly minimal? For a $260 million pick-up in tax revenue? I ask you: how do you quantify what is 'fairly minimal'? He went on to say:

That I know might sound strange to those directly involved in the sector because we are looking at the net impact across the economy rather than just the impact in the sector.

So, don't look at it across the sector; look at it across the whole GDP. It is similar to what the government does with reference to rationalising its debt ratio and saying, 'It's only seven per cent or only 10 per cent of GDP.' If you take this as a rational comparison against not a number that should have been used as a common denominator but the whole economy, of course it is only minimal. This is the logic that they are using to try to rationalise the irrational. He went on to say:

Again, if we are looking at financial flows there would be a greater reduction in the flows that occur through managed investment trusts but what we are interested in is what happens to the aggregate base and that is a different thing.

Mr Verwer: The question was: where would that extra money come from in order to ensure that the aggregate basis remained in alignment? We are still waiting for the answer.

Mr McDonald: That is part of what being a small, open economy that is engaged in international capital markets with a freely floating exchange rate does.

There were some other comments from Mr Verwer:

In fact, these foreign investors have said to us quite clearly that some of them had already pulled out because we no longer meet their hurdle rate—it did not take long to do the sums; others said that they have frozen the negotiations.

To support those comments I draw your attention to the Hansard of the Economics Committee and questioning of Mr Martin Codina from the Financial Services Council. The member for Throsby asked him:

Is there any evidence for that flight of capital occurring?

That is, as a result of this legislation. This is where the $1 billion comes in. Mr Codina said:

There is absolute evidence of that. Collectively we have quantified in excess of $1 billion, some of which has been made public and some of which is highly sensitive, because of the nature of the foreign investors. In some cases you have sovereign funds—in other words, it would be akin to a foreign government being critical of the Australian government as a consequence of the change.

Why am I only hearing about this in Economics Committee hearings where the Financial Services Council of Australia is giving evidence? Why weren't these opinions sought in the consultation process? Why weren't these people consulted? When you talk to Treasury they always open up with, 'We've consulted with the industry; we've consulted with everyone; we've consulted this to death.' Mr Codina later went on to say:

Let me put it this way. We were disappointed that we were not consulted prior to the announcement being made on budget night. Since this government came into office in 2007, we have issued something like 10 media releases which were supportive of subsequent changes that have been made, either to our tax system or regulatory-wise, that essentially had their origins in the Johnson review. We were one of the leading participants in the Johnson review, involved in much of the work that was conducted there. So I guess all I can say is it did come as a surprise, as an organisation that is actively involved in assisting the government in this area, that the announcement was made without any prior consultation.

Why would a government not consult with major stakeholders on such a sensitive bill that has the capacity to generate $1 billion of flight in capital from this nation? I will tell you why. To save the budget bottom line—I can think of no other reason—of a measly $260 million.

The government's constant chopping and changing in relation to the MIT withholding tax has yet again reduced our predictability in the eyes of international investors. If passed, this bill would undermine Australia's objective of becoming a regional financial services hub in the Asia-Pacific region. Attracting more foreign investment is important to achieve stronger economic growth which would lead to increased government revenue without the need for many new or increased taxes. Industry was barely consulted; the Australian people are rarely consulted; and the coalition remains opposed to this bill. (Time expired)

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