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Tuesday, 26 June 2012
Page: 7917


Mr ROBB (Goldstein) (09:30): It is just a few weeks since the budget was brought down and on the night of the budget we saw the government announcing the doubling of the final withholding tax on managed investment trusts to 15 per cent for foreign investors. Run forward a few weeks and here we are. The measure was listed for debate last week with an increase in the tax from 7½ per cent to 15 per cent. It was listed for debate in the House as part of an omnibus group of bills. When the government came to speak they stood and withdrew that part of the omnibus set of bills which related to this increase in the final withholding tax.

We thought, 'This is a good sign; the government have had second thoughts about the stupidity of their decision to double this tax in such a difficult international investment climate. They have suddenly realised not only the impact in the short term but also what this will do our reputation as a reliable place for foreign investment.' But, no, within a space of 24 or 48 hours we were told that they were going to reintroduce this measure. We assumed that there would have to be some changes, that they had had second thoughts and they would have tidied up this legislation.

But what did we see? When the legislation was reintroduced, we saw that there was not one word changed in the whole thing. It is exactly the same as the stupidity that we saw on budget night, with the announcement of the doubling of the withholding tax. This of course confused everyone, including the business sector. But then we had the Minister for Finance and Deregulation, in the other place, admit that the government were effectively being dictated to by the Greens. So the legislation is announced, it is introduced, it is withdrawn and it is reintroduced, and then we find out that there is some motive for all this flip-flopping and this embarrassing approach by this government.

The Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 has become in many ways a classic symbol of the incompetence and chaos that we are seeing on the other side of the chamber in the way in which they are managing so many issues. The political management of this government is in chaos, and it has been for months. This is very much at the crisis of confidence that is now characterising the seven million households in Australia and the crisis of confidence that is running across the business sector outside of the resources sector. Even within the resources sector we are seeing so many Australian companies have now got their sights set on Africa.

I worked in that industry for several years and I have lots of contacts in the resources sector. I was in Perth three weeks ago to see a lot of these people and to get an update on what was happening with investments et cetera. Half of the people that I went to see were not available because they were in Africa. Three hundred Australian mining companies are now in Africa.

In Perth I met with one of the large investment funds from the US who have been there for four years. They are very active in placing investments from the United States into our mining sector. This fellow was ropeable. I met him at the airport. He was on his way back to the United States to have four meetings across the United States with a series of investors in his $5 billion investment fund. He was at pains to single me out and to list the litany of sovereign risk issues that have so damaged the reputation of Australia as a safe investment and the 40 per cent increase in the cost of mining projects. He was beside himself that he had to go back and at every one of these meetings across the United States say to each and every one of these important investors in his investment fund that they now needed to focus on Africa.

So with potentially still several years left in the mining boom, still with a pipeline of a quarter of a trillion dollars that has not gone to FID—or final investment decision—here we have an investor, who has invested time and has lived in Perth to place these investments for the last four years, who has had to go back to the United States and had to tell people to go to Africa, that investments now from that fund will go to Africa. This is what it has come to. This government is even undermining the mining boom. It takes a lot of skill, a lot of great ability, to take what are rivers of gold and compromise them so comprehensively as this government has done. In the last few years of this mining boom every mine that we could have achieved, which would have given us another 50 years of prosperity, will now be something that goes to Africa in the main. Again, by this decision, this government sent shock waves around the world not because of the size of the decision but because of the way in which it has added to that litany of sovereign risk issues that we have now confronted. If passed, this tax increase—with no grandfathering provision, which effectively makes this a retrospective piece of legislation—will do untold damage to our reputation as a stable and reliable jurisdiction to invest in.

The night after the budget I rang contacts in the United States—Australians who are trying to place investments here in Australia—and they were beside themselves. They said that all directors over there look at are the headlines. They do not have time, with so many destinations for possible investment, to understand the nuances. All they see are the headlines. They have seen the headlines about prime ministers coming and going as though we have a revolving door. They have seen attacks on former prime ministers by their own side that make their hair rise. They have seen headlines on carbon tax, on mining taxes and on the reregulation of the labour market, which has compromised the cost structure of doing business in the mining sector here.

They have seen the way in which this government panicked in an extreme fashion with the live cattle exports, closing off 40 per cent of the protein going to our biggest neighbour. We can almost throw a stone over to Indonesia; it houses 300 million people on our doorstep, is a big part of our future and is growing very strongly. And what do we do? Three nights after a television program we send them an email—it did not even go via the ambassador, who heard of it in the car on the radio—telling them, 'By the way, 40 per cent of the protein coming into your country is being stopped indefinitely as of now.' What a way to handle our relationship. What total humiliation of a neighbour.

The DEPUTY SPEAKER ( Ms AE Burke ): Can I draw the member for Goldstein back to the bill before the House. I think he has ranged off widely this time.

Mr ROBB: I have not ranged widely. What I am saying is this adds to—

Government members interjecting

Mr ROBB: They can all laugh on the other side. This is just politics to them. This is simple and pure politics. It has nothing to do with our reputation as investors. So keep laughing! It is the way in which they deal with the serious issues in this country. This issue of the doubling of the withholding tax adds to this litany of sovereign risk issues which I have been seeking to draw attention to. Greg Hyland, the Shanghai based Regional Director for Asia Pacific Capital Markets with Jones Lang LaSalle, said recently:

People like investing in Australia because it has certainty, and when that environment changes people sit back and reassess the situation.

Obviously, when you double taxes, it's not attractive for investors. It undermines Australia as a safe haven to invest.

This sovereign risk in Australia has been monumentally enhanced by this government, and all for $260 million. Those opposite are going to sacrifice billions of dollars of investment for the sake of trying to meet a target surplus which they will never meet. They know that. They are not going to get there but, in order to try to demonstrate, that they will go to any lengths and sacrifice the integrity of our reputation as a safe investment haven.

This is so perplexing, and it totally contradicts budget night 2008. On that budget night former Assistant Treasurer Chris Bowen, the member for McMahon, announced a progressive reduction in the withholding tax from 30 per cent to its current rate of 7.5 per cent. It is a matter which was widely regarded and supported. It was part of Labor's plan to develop Australia as a financial hub for Asia and the Pacific:

The government had acted to 'dramatically improve the competitiveness of the Australian managed funds industry', Bowen said.

The move, he added, would provide a 'significant boost to Australia's ability to compete globally' and would support the aim of growing assets under our management from the current $1.7 trillion to $2.5 trillion by 2015.

How things have changed in just four short years! Now we have a situation in which the sound principles and objectives that the then minister espoused have evaporated with this bill. More so, the Assistant Treasurer has the gall to attack us for defending Labor's original policy of 7.5 per cent. He is there attacking us for defending Labor's policy, which was widely heralded and widely admired and which has promoted significant investment in this country.

There is a requirement for MITs to have an in-country office. Several major retirement funds are in the process of developing those offices, and what do we do in the middle of it? Just as people become comfortable and encouraged by this provision the government pulls the rug out. Not only that, but it does not even grandfather the provision so that they are now stuck with investments that have been made at 7½ per cent which may well not have stacked up at 15 per cent. These are multimillion-dollar and in some cases billion-dollar investments.

The Assistant Treasurer claims that we have used flawed modelling from the Allen Consulting Group. Give me a break! Talk about flawed modelling. This government would have to have the worst record of any government for unreliable forecasts. The UBS forecasts miners will pay $4.78 billion over the next four years against Treasury's estimate of $13.4 billion. Look at the budget forecast—it went from $12 billion to $44 billion after making several jumps along the way over 18 months. How can people reliably assess or make investment decisions—or any decisions, for that matter—with the record this government has?

This government will stoop to any level to distract and to play politics. This is an act of base politics. Clearly, they have done a deal with the Greens. Something will come up in the Senate, and we will have more confusion. This bill will be amended again in the Senate—you can see it coming. The Assistant Treasurer will stand up and defend the bills, knowing full well that they have done some deal with the Greens. It will confuse the investment market once again, and who knows what strings are attached? Who knows what other pieces of legislation will come into this place that we know nothing about and which are part of this grubby deal that the Assistant Treasurer is going to seek to put through with the Greens in the other place?

This government is a walking sovereign risk. This bill is part of that. The legislation should stay as it was. (Time expired)