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Wednesday, 27 June 2012
Page: 8304

Dr LEIGH (Fraser) (10:08): The finance sector, unlike other sectors of the economy, acts as the lifeblood of all firms. When finance operates effectively, start-up firms are able to obtain financing for new ideas; firms that hit a rough patch but have good long-run prospects are able to borrow; and expanding firms benefit greatly. The finance sector that is sclerotic hurts the entire economy.

So it is a good thing that the opposition are supporting this bill, which is aimed at ensuring that Australia can be a finance sector hub. I will focus on the high-level arguments for Australia being a finance sector hub and leave some of the detail to my colleague the member for Shortland. When the finance sector goes bad, things go very bad for the entire economy. In Australia we can look back to the state banks of Victoria and South Australia; in the United States they can look back to the savings and loans crises of the 1980s; and, of course, in the acronym 'GFC', the F stands for 'financial'.

When things are going well, as they are with the pool of superannuation assets in Australia, a finance industry produces a range of good jobs, in which people have a role of efficiently allocating funds across the economy. Australia is well placed for that. We speak many languages; one in four Australians are born overseas; one in two has a parent born overseas or were themselves born overseas. That depth of language talent—although, I believe it should be greater—is a great source of strength for the finance industry in Australia. The trust that underpins good markets and the efficient operation of firms is absolutely critical.

The Johnson report concluded that Australia had arguably the most efficient and competitive financial services in the Asia-Pacific. They noted that, even amidst mining boom mark 2 with terms of trade at all-time highs, the finance service sector was the largest single contributor to GDP of any sector of the economy and employed in excess of 400,000 Australians. It is recognised as one of the most sophisticated and stable in the world.

The federal government established the Australian Financial Centre Forum in September 2008 as part of our commitment to position Australia as a leading financial services centre. That report, known as the Johnson report but formerly called Australia as a financial centre: building on our strengths, was released on 15 January 2010 and made a number of recommendations relating to the taxation of foreign funds in Australia.

The Henry tax review, also released in 2010, recommended that:

Taxation arrangements applying to Australian managed funds and related services should be improved to provide greater certainty that conduit income will not be subject to Australian tax.

As the explanatory memorandum notes, the bill is:

… designed to ensure that the complex tax issues that previously arose do not discourage foreign funds from engaging the services of an Australian intermediary.

The amendments ensure that foreign funds that use Australian intermediaries are not subject to Australian tax on certain income that, in the absence of an Australian intermediary, would otherwise be foreign source income. It is recognised on both sides of this House as an important step towards building Australia as a finance sector hub in the Asia-Pacific.

I commend the bill to the House.