Ed Husic (Chifley, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Treasurer) Share this | Hansard source

I also extend my thanks, on behalf of members of the Standing Committee on Economics, to the committee secretariat for all their hard work and their continued diligence. It is very much appreciated. However, I must say the one good thing about this inquiry is that it is over. It was an inquiry less focused on good policy and more on glaring publicity. Three things underpinned it. Firstly, there was a highly questionable and alarmist report by Credit Suisse into projected levels of Chinese foreign investment in residential property; secondly, there was a constant attempt to prove that there were systemic flaws within the way FIRB was enforcing compliance with investment laws; and thirdly, and levering off this last point, there was an obsessive drive to introduce a new tax on foreign investors at a time when the focus should be on improving trade and investment relationships.

Inquiries can be very useful means to spotlight areas demanding reform or improvement, but they need firm foundations to achieve this. This inquiry was sparked by an exaggerated publicity-seeking report by a firm you would expect better of, Credit Suisse. In March, Credit Suisse issued claims that inflated the projected scope of likely Chinese investment in residential property. When the committee sought to question them on the report, they had to be dragged to the inquiry to appear, which is not surprising, because they were no doubt embarrassed by their own claims. They used flagrantly emotive language in their report, including claims that 'The Chinese want to buy your house' and 'The dragon discovers the quarter acre dream'. This fanned reporting of contestable claims that $44 billion of Chinese investment would be ploughed into Australian residential real estate. After sustained questioning at a public hearing we learnt that Credit Suisse had included in its calculations purchases made by permanent residents who were of Chinese background. A lot of people would wonder how permanent residents can be classified as foreign investors. It defies belief.

The problem is that this type of hype reporting helped prompt this inquiry, and the inquiry then became a launching pad for a new tax grab. Make no mistake, the coalition wanted to grab a much bigger tax slice out of foreign investors than was finally recommended. You only have to refer to the media coverage generated during the course of the inquiry to know this to be the case. The new tax has been scaled back for now. What this inquiry heard on countless occasions was that foreign investment adds to housing supply in this country. It generates demand, spurs growth in jobs and economic activity. It is beneficial to the nation and our economy.

The rules around foreign investment in residential real estate are clear-cut. It is permissible for new developments, and strict rules prohibit the purchase of existing residential property other than for temporary residence. Whilst some marginal changes can be contemplated to these rules, there was little evidence submitted to the inquiry of widespread, systemic noncompliance. This is despite the fact that FIRB's compliance capabilities were subjected to regular public criticism by the coalition and little procedural fairness was extended to FIRB to put public criticisms directly to them and allow them to respond. It was extraordinary that the minister with direct oversight of FIRB and Treasury, no-one less than the Treasurer himself, either failed to defend them from these criticisms or he was happy for his coalition colleagues to launch them. Even more extraordinary was that after the coalition levelled those criticisms the report acknowledged that FIRB has an advisory role, and Treasury needs to shoulder more responsibility for compliance.

The concerns about compliance are being used to justify an up-front impost on investors. I would make a number of points about this. First, the government has to work out if it is in favour of foreign investment or not. It has driven foreign companies, such as Holden's, out of the country, it has blocked investment proposals, such as GrainCorp, and now it wants to siphon funds out of foreign investors. No-one for one minute should be fooled by the words used in this report of a 'modest application fee', which, by the way, the coalition tried to suggest would be between $500 and $1,500, and today it is a firm $1,500.

You cannot trust that this government, which has introduced a range of surprise new taxes or sudden tax increases, will not be tempted to milk revenue out of these investors at a higher rate down the track. The coalition argue that they will use the funds raised by the impost to improve compliance. This does not stack up. There is scope for the Australian National Audit Office, for example, to be engaged to review compliance processes and procedures utilised by both Treasury and FIRB. ANAO can and does conduct performance reviews and could have easily been engaged, and recommended to have been engaged, to assess the way that both Treasury and FIRB undertake compliance and determine if resource allocation for this activity is appropriate. In fact, it should be recommended that ANAO consider doing this as a matter of course ahead of the imposition of any new fee or tax. I would certainly urge them to consider this. They can undertake the activity and they, again, should consider to do so. But all of these reasonable suggestions have been ignored by a coalition determined to find new taxes.

Some of the other recommendations will have questionable effect. The big issue with data in this space is time lag—the distance between an intent to purchase and construct and then the actual construction occurring. A new national register that simply logs residential status of investors will probably do little to alter or change the impact of data lags in this area. While some good might have a chance to emerge from the inquiry, and some modest compliance measures might see the light of day, one hopes this report dissolves from memory, and fast.

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