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Monday, 25 June 2012
Page: 7734

Mr BALDWIN (Paterson) (19:33): I rise to speak on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

Since 2 May, the government has had more positions on the MIT withholding tax rate, and attracting investment, than I can count on one hand. The history is simply this: on 2 May, Minister Ferguson launched the Australian 'open for investment' campaign, designed to attract offshore investment in the 80 shovel-ready projects in Australia. Less than a week later, on 8 May, the budget was handed down, announcing the MIT would go from 7½ per cent to 15 per cent—effectively undermining the Australia 'open for investment' campaign.

On the evening of 9 May, 2012, Minister Ferguson told the National Tourism Alliance at an industry gathering that he appreciated there were people in the room who were unhappy but that his job was to defend the government, so he would defend the government. On 20 May, Minister Ferguson failed to appear in the House to defend the MIT withholding tax increase that he said he would defend at the NTA.

On 20 June, the government amended its own bill to take out the doubling of the MIT withholding tax rate. On 21 June, the very next day, the government reintroduced its own MIT withholding tax bill in exactly the same form to again raise the tax from 7½ per cent to 15 per cent—proving the often-made point that Labor cannot stick to a policy from lunchtime to Lateline. I note on the speakers list that Minister Ferguson is not going to come into this House and defend his government's decision to lift the MIT withholding tax rate which is effectively knocking over his campaign program for those 80 shovel-ready projects.

It is no wonder there is a crisis in confidence in the tourism industry. It appears that the government does not understand that international capital is very fluid and will flow wherever the best opportunity and returns are. I have to wonder what the Independents' price was when they sold out to approve this measure. I have just heard a member of the Greens say they are going to pass this bill in the House but reserve their opinion in the Senate. The place to block this bill is here and now, because it would not be back on the agenda without their support. If the Independents and the Greens support this legislation they will have gone from hero to zero in the tourism industry's opinion in a matter of days.

This measure will combine with nine other measures in the budget that will undermine the government's 2020 Tourism Industry Potential strategy, which was publicly released in November 2010. That strategy—or flyer, as some in the industry call it, given its lack of detail—has outlined an ambitious set of goals to promote the long-term, sustainable growth of the Australian tourism industry. According to Tourism Australia, realising this potential would mean 'doubling overnight expenditure for Australia’s tourism industry, from $70 billion to as much as $140 billion by 2020.' It would increase tourism's contribution to the GDP to up to three per cent in 2020 and increase tax revenue from tourism from $9.3 billion in 2009 to as high as $14.5 billion in 2020. The carbon tax alone makes this goal relatively unachievable. Taxing new hotel developments makes those goals even more impossible. In conceding the tourism industry's victory against Labor's departure-tax cash-grab, the government might have opted to repair some of the bridges along with other tourism infrastructure. Instead, it announced a reduction to the Asia Marketing Fund from $61 million to $48.5 million—that was in a press release that was hidden quietly on the Treasurer's website—and that was a payback for forcing government to back down on a budget measure. Such a childish response only adds to the chorus of calls for a grown-up government to get Australia back on track. The regional tourism infrastructure fund announced: firstly, has effectively reduced the Asia Marketing Fund by $12½ million; secondly, returns the industry the $11.5 million previously cut from Labor's first budget in 2008-09; and, thirdly, offers no detailed plan to deliver on either tourism demand drivers or tourism supporting infrastructure.

The tourism sector did not take lightly its huge step in launching full-blown advertising campaigns against the government in recent weeks. It did so to protect jobs and is looking forward to building what should be a normal relationship of mutual trust, full disclosure and, importantly, genuine consultation. It reflects well on tourism bodies that they did not respond to the petty slap of a reduced Asia Marketing Fund as a consequence of the government's reduced departure tax revenue. The sector might have highlighted that the government could easily have kept the Asia Marketing Fund intact since this investment was only 10 per cent of the projected revenue in the first place.

Yet this should not be confused with the tourism industry taking the hotel investments tax lying down. This is a vital issue for the tourism industry and the government's own words reinforce the point. Eleven months ago, the now former minister for tourism, the Hon. Nick Sherry, told industry leaders:

The sad fact is that much of Australia's accommodation is outmoded and outdated and Chinese visitors in particular … are used to very modern facilities in their own country. There is a great challenge in tourism to invest in the modernisation of facilities.

In the same meeting he said that we need to see an increase in investment to realise the potential, and added that the country would need between 40,000 and 70,000 additional hotel rooms by 2020 to cope with projected demand.

Individuals and trusts base their decisions on statements like these and like the twice-yearly releases from Australia's independent Tourism Forecasting Committee. Smart investors will always weigh potential returns with risk, and they look to the government to manage the economy according to a plan. This gives hotel investors confidence to sign on for the long-term investments in hotel developments that are typically delivered over a 10-year cycle.

In last week's debate I read into the Hansard the views of Tourism Accommodation Australia, the Tourism and Transport Forum and the Australian Federation of Travel Agents, amongst others. It would benefit the House to reflect today on the prebudget submission by the Accommodation Association of Australia, delivered well in advance of the budget—in fact, it was delivered the day after Australia Day in 2012. They say in their submission:

32. While accommodation rooms within Australia are, by and large, of a high standard in comparison to other countries, continual refurbishment is required for businesses and the broader industry for it to remain globally competitive.

33. The stagnation in the number of overseas visitor arrivals in the second half of the last decade, together with the drop in domestic tourism has created a difficult trading environment for accommodation businesses, notably those in locations outside Australia’s capital cities.

34. The returns for many investors in accommodation businesses have not been adequate enough for them to make major commitments to capital expenditure on upgrading existing rooms and other parts of their businesses (restaurants, function rooms, meeting/convention space, leisure facilities).

That was the AAA prebudget submission dated 27 January 2012, so the government is aware of these issues.

Credit should be given to Minister Ferguson in delivering a prospectus of unfunded hotel investments. It is no silver bullet for tourism investment, and it is useless unless matched by other government policies that work in the same direction. I welcomed the prospectus as a 'good first step to restoring tourism infrastructure' when it was announced on 2 May 2012. Yet it only took the government six days to undermine this potentially effective measure with plans to double hotel investment tax, and today they replicate that action. This confused and incoherent approach highlights a dysfunctional government with portfolios not delivering a whole-of-government approach. Otherwise, why would you launch a policy based on a 7½ per cent tax, a week ahead of the government, in its own budget, increasing that tax to 15 per cent? It flies in the face of logic, reasoning and, in particular, investor confidence.

We were all reminded of this last week when the government withdrew its hotel investment tax and reintroduced its bill the next day in exactly the same form. I say to you, Mr Deputy Speaker Scott: what sort of message does this send to potential investors? The opportunity for crossbenchers to deliver stability and certainty comes tonight with these very bills. In supporting the coalition's opposition to automatic CPI indexation of the departure tax last week, the Independents helped make Australia a more attractive tourism destination, to the tune of $125 million a year, and that is according to the government's figures. Yet fixing this demand challenge is pointless unless matched by a commitment to fix the supply-side challenges. And according to all of the tourism and accommodation sector peak bodies, the managed investment trust cash-grab is a key test for minority government to act responsibly.

Despite the government's own vacillation undermining investor confidence, the Property Council of Australia has indicated that the only hope Australia has for maintaining its reputation as a safe place to invest is for the parliament to firm its resolve and reject this bill. Independents cannot walk away from their responsibilities to regional tourism on the basis of an exaggerated regional assistance package, for this small amount of money will be spent in a meaningful way. It is vital to achieve the right mix of demand driver and supporting infrastructure allocations. Examples of demand drivers might be the Tasmanian Parks and Wildlife Service's Three Capes Track, or the redevelopment of the Tasmanian Museum and Art Gallery. Supporting infrastructure is the transport and accommodation you would use when going to see a tourist attraction, like the Spirit of Tasmania, or the Old Woolstore Apartment Hotel—something I thought the member for Bandt might be interested in. However, the money is allocated, Independents should demand accountability, planning, and an outcomes focus. As I write this, I think of the Clump Point marina and the jetty at Dunk Island—still in a state of disrepair 18 months after Cyclone Yasi, despite our Prime Minister approving money to fix this infrastructure.

I seek leave to table a photograph of the jetty at Dunk Island, still in a state of disrepair some two years after it was damaged by Cyclone Yasi.

Leave granted.

Mr BALDWIN: There are quite literally thousands of Australian restaurants, motels, hotels and other businesses that have not spruced up their properties since the Australian dollar approached parity with the US in 2008. With fewer customers comes less profit to reinvest in hotel upgrades to stay competitive with other markets. The crisis in both consumer and investor confidence in Australian tourism is not all because of unfortunate realities like the sluggish economic performance of our traditional markets, the high Australian dollar or natural disasters; it is also because of perfectly avoidable policies that damage tourism. The standout example, of course, is the world's largest carbon tax, which will make foreign destinations even more attractive to tourists and diminish even further returns on hotel investments.

Like potential investors, Independents must weigh the totality of government policy affecting returns on investment here compared to overseas. Doubling hotel investment tax will affect investment decisions yet so will the other nine budget measures that will damage the tourism industry. Australia should seek to grow tourism and enjoy the benefits that flow from higher employment, a diversified economy and improved ties with other nations. Overtaxing tourism will stunt this growth and is short-sighted in the extreme. For tourism there is no greater challenge facing the minority government than repairing the damage already done to investor confidence in this afternoon's debate.

So if the Independents who support the coalition and, more importantly, the industry in knocking over the CPI increases in the PMC want to remain the pin-up boys of the tourism industry then I say this to them: oppose this legislation, which will directly affect investment in your seats. It will directly destroy confidence in investment in Australia. It will destroy the concept that this is a good sovereign nation to invest in. And, importantly, think about your own electorate. Think about the employment figures in your own electorate. Think about how this investment could be placed in your electorate and you can take part in the journey.

By supporting this government, I say to them—and if indeed they do support this bill; the member for Bandt has already indicated that he will be supporting this bill in this House—at what price have you sold out your electorate? If you stood up for the tourism industry you would not be selling out the tourism industry, and those workers and those investors— (Time expired)