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Wednesday, 2 June 2010
Page: 5002

Mr HARTSUYKER (4:24 PM) —I welcome the opportunity to respond to the statement of the Minister for Financial Services, Superannuation and Corporate Law relating to Australia as a financial services centre. The coalition welcomes this debate and we support responsible efforts to build Australia’s standing as a global financial centre. However, we disagree with the government’s broad approach on spending and taxation priorities and we are greatly concerned about how this approach is hurting Australia’s standing as a financial centre here and now.

It was the coalition which started the process of dedicating significant government resources to establishing Australia as a financial centre, with a particular focus on Asia. The current shadow Treasurer, the member for North Sydney, had the honour of becoming Australia’s first Minister for Financial Services and Regulation in 1998 and it was the member for North Sydney who launched the coalition’s economic principles on 19 May—just two weeks ago. In that document the coalition detailed how we remain committed to boosting Australia’s attractiveness as an international financial centre and expanding our exports of financial services. We welcomed the Johnson report and urged the government to respond to its recommendations, which the government has now done.

The Johnson report states that its recommendations build on the work of the previous government, which made some significant regulatory and taxation reforms to expand Australia’s standing as a financial centre. Firstly, as I have mentioned, the coalition appointed Australia’s first minister for financial services in 1998, providing a dedicated advocate and voice for the financial services industry in the Howard government ministry. Through disciplined fiscal management and commitment to placing the budget in surplus, the coalition in government was able to abolish a range of inefficient financial services taxes, including financial institutions duty and stamp duty on marketable securities and the interest withholding tax on Australian sourced interest paid to offshore investors. These reforms saved investors billions of dollars in taxes and compliance costs.

The coalition also overhauled Australia’s treatment of offshore banking units, an area discussed in the Johnson report. For the first time, fund managers, life insurance companies and custodians were given full tax treatment under the offshore banking units regime, whereas the previous arrangement only allowed banks and authorised foreign exchange dealers to benefit from the concessional 10 per cent tax rate. The coalition is proud to have launched the Centre for Global Financial Services, which was formerly named Axiss Australia, in June 2000. Axiss had a charter to enhance Australia’s position as a provider of global financial services. In particular, it created the role of Australia’s global financial services ambassador and used this position to highlight Australia’s credentials as a centre for global financial services in the Asia-Pacific time zone.

Of course, the current Australian Financial Centre Forum, responsible for the Johnson report, grew out of the coalition’s efforts to implement a dedicated government body to expand Australia’s standing as a financial services hub in the region. The coalition is proud of what we achieved in extending Australia as a financial services centre, and we are proud of our successes. Between 2003 and 2007, Australian investment in foreign stock grew from $998 billion to $1.724 trillion, an increase of 72 per cent. The number of people employed in the financial services industry increased by over 100,000 workers between November 2000 and November 2007 to over 410,000 employees. This growth has gone backwards under the Rudd government, with employment falling by about 10,000 workers to June 2009.

Overseas investors and institutions had faith in the coalition’s ability to provide a stable and progressive investment environment. The coalition has this ability to provide this environment, because we believe in four foundations for expanding Australia’s position as an attractive investment base, which I will outline. Firstly, the coalition believes in the quality of Australia’s financial markets. Australia possesses transparent and liquid financial markets which encourage investment from abroad. Secondly, the coalition believes in the governance structures we implemented in the Wallis reforms to provide stability and resilience against global turmoil. These reforms by the coalition made us the envy of the developed world in the area of financial services. This government is ruining our position—and I will get to that shortly. Thirdly, our personnel are a huge advantage for Australia’s financial services industry. We have the population, the language skill and a high level of education—all  attractive to global market operators. Finally, Australia has the infrastructure—modern communications and IT systems, as well as legal and accounting systems—to provide efficient market services.

These foundations are why the coalition believes Australia is well placed to expand its financial services industry on a global scale. The Johnson report was only made possible because of the coalition’s reforms to financial services. And, as I have said previously, the coalition is broadly supportive of those parts of the government’s response to the Johnson report which have not been linked to Labor’s great big new tax on mining. I think the government and the minister need to ask themselves why the coalition in government could achieve responsible measures to expand Australia’s financial services industry. The answer goes toward the different approaches of the current Labor government and the coalition. The coalition is committed to building Australia’s attractiveness as an international financial centre. We can achieve this responsibly because, unlike the Rudd government, we are committed to budget surpluses and spending restraint. Now let us look at the government approach. The Rudd Labor government inherited a $20 billion surplus from the coalition and no net debt—and it blew it all. Within less than two years, we had spending on overpriced school halls and pink batts. We spent money putting pink batts in and we spent money taking pink batts out. The government is out there borrowing $100 million a day to continue buying fraudulently derived school building projects and to pay for blowouts in poorly managed programs. They are out there competing in the debt markets with small business and financial institutions, pushing up inflation and pushing up interest rates.

Today I had the pleasure to attend a presentation from the Tottenham Primary School in front of Parliament House. I saw the minister could not be bothered turning up. She would not show her face. We saw a presentation from Tottenham Primary School and we saw a replica of a canteen which cost the taxpayers $600,000, which should have been built for less than 10 per cent of the cost. There are many more examples of overpriced school halls in my own electorate of Cowper, which I have detailed on previous occasions. This incredible waste and mismanagement is why businesses are crowded out of debt markets and why the cost-of-living pressures are increasing as a result of interest rates and inflationary pressures.

But the minister who presided over the spectacular failures of GroceryWatch and Fuelwatch knows all about waste and mismanagement. And that is the key to this issue. The government has wasted so much taxpayer money that it needs to find extra taxes to fund its policy agenda. The Rudd Labor government does not have the courage or the commitment to make the tough decisions and get the budget back into surplus, so it taxes and taxes and taxes and promises and promises to cover the cost of its waste.

So whilst the coalition support some of what the government is trying to achieve with regard to financial services, we certainly oppose their approach. We oppose their unfair new taxes. In particular, we oppose taxes which threaten Australia’s standing as an international investment option. We oppose new taxes which are going to increase the sovereign risk of this nation. How can this minister and this Labor government be serious about relieving the tax burdens on financial services when they are massively increasing taxes on the biggest industry that those financial services rely on? Labor’s great big new tax on mining is actively destroying Australia’s reputation as a strong and stable country in which to invest. The $90 billion, approximately, that has been lost in share value since this tax was first mooted is an indication of the very low confidence that global financial institutions now have in this government. Why would international investors have continued confidence in the future of Australia as an investment centre, when our biggest investors are claiming this government has now dramatically increased the sovereign risk profile of Australia?

Here is what CEO of Rio Tinto, Mr Tom Albanese, said on Lateline on Wednesday:

It’s as if they’re—

that is, the government—

coming to us saying we want to be your 40 per cent partner, ignore the fact you’ve taken all the risks, ignore the fact you’ve taken all the lumps we want 40 per cent of your pre-tax profits.

That’s sovereign risk and that’s why … it’s the number one priority on my plate, globally, around sovereign risks.

Now, the government like to claim that comments such as these are just talking down Australian investments. But it is the Prime Minister who wanted a fight on the tax and the government who are eliciting these comments. It was Prime Minister Rudd and the gang of four who wanted a fight with the mining companies because they thought the tax would be popular. And it is the government—not the miners, not the opposition—who are damaging Australia’s reputation as an investment destination.

Let us consider what those investors actually operating in international markets think about the government’s approach to taxation and economic reform. International law firm Freehills is issuing the following advice with relation to its international investors:

  • Project proponents benchmark their developments by a variety of factors including sovereign risk and internal rate of return. Inevitably Australian projects will be re-ranked as a result of the imposition of RSPT. 

Citigroup analyst Paul Brennan says that his discussions with investors in Singapore and Britain make it clear that there was considered to be greater political risk in investing in the Australian market. The Commonwealth Bank research provided to investors says:

… increased sovereign risk is an issue not just for the resource sector but for the entire private sector in Australia.

PricewaterhouseCoopers says that there is a risk the government’s new mining tax will see investment dollars flow to resource rich countries such as Africa, South America and Canada. No wonder the Canadian government are actively advertising their resource sector in contrast to Australia, telling investors that Prime Minister Rudd’s tax gives Canada a competitive advantage.

The Johnson report states:

Our well educated and mobile workforce, along with our political stability … have encouraged some multinational financial services companies to set up businesses in Australia.

Well, what has the government done to Australia’s political stability? It is telling the world not to invest here because the government will tax investments in one of our best performing industries at the highest effective tax rate in the world. That is one way to foster international investment! That is one way to attract international capital! This was confirmed yesterday by KPMG, which released a report and said that the government had caused a ‘lack of certainty in the debt market’ and that this means miners ‘will not be able to price in meaningful reductions in the cost of debt, and access to debt will be challenging.’ So international financial institutions will find it challenging to invest in Australia’s resource sector, and surely this will flow to every sector. But the government are happy to mislead the public and distort the facts on the impact of that great big new tax on mining on Australia’s financial services sector.

The Labor government was happy to mislead the sector by providing statistics, from a student paper from good old North Carolina, that the mining industry was only paying 17 per cent tax—

Mrs Bronwyn Bishop interjecting

Mr HARTSUYKER —Even though it didn’t include profits, it did include a couple of Australian companies, but it mixed in New Zealand as well, just for a bit of added confusion. The statistics from the KPMG report prove that this government have been misleading the public and prove that they simply cannot be trusted to follow through on their proposals in response to the Johnson report. The KPMG report shows that the effective tax rate on iron ore producers is currently 43.6 per cent, for coal it is 41.1 per cent and for nickel it is 34.3 per cent. Yet we have the Treasurer running around with his pie charts, of uncertain accuracy. This government are working on destroying industry and destroying mining, which will effectively have tax rates of up around 55 per cent. How could this possibly help Australia’s standing as a financial services centre? How could this possibly help our standing as an international destination for investment capital?

The KPMG report figures are not figures taken out of some sort of student’s report from North Carolina. These are figures from a very reputable Australian organisation that knows Australia—not a report that revolves around four companies and is focused not only on Australia but on Australia and New Zealand. It seems absolutely outrageous that this minister can come here and claim credentials in relation to making Australia a centre for international financial services. It seems absolutely incredible coming from a government that is deterring international capital, that is driving away investment opportunities, that is working on reducing the level of employment and investment in the mining sector—a vitally important sector, the sector that got us through the recession, as opposed to the government’s claim that some overpriced school halls got us through the recession. This is an absolute outrage. It is an embarrassment to the government that the minister would attempt to parade his credentials in relation to a quality-of-investment destination, when the government is working exactly to the reverse effect.