Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

Normally I am the first to leap in and join in any attack on the Labor Party, but on this occasion, I must say, I must distance myself considerably from the attack which Senator Joyce has launched upon the Labor Party. I dissociate myself from that attack. I welcome the Labor Party’s intelligent, reasoned and sensible support for these measures, which, as Senator Sherry rightly pointed out to were announced by the government more than 18 months ago. So the opposition has had due time to consider these amendments properly and sensibly and has reached the right conclusion that, on this occasion, it should support these amendments. I applaud the Labor Party for reaching that position and, in so doing, strongly disagree with Senator Joyce’s attack upon the Labor Party for so doing.

I should also point out that, in contradiction to what Senator Sherry may think or assert, Senator Joyce, to his credit, has made it clear to the government that he cannot support this schedule. He has not just come in latterly to do so. He has made it clear in private conversations with relevant ministers that, for reasons he has explained, he is not in a position to support this schedule. While that is disappointing—we would like to think that we can have unanimous support on the coalition side for all coalition bills, and we will always endeavour to achieve that—it is a fact that in the proud tradition of our parties we understand that, on occasion, and this is one, there will be the odd member of the coalition who finds it is not possible to support the government on a particular measure. So I must be fair to Senator Joyce in that regard.

I agree with Senator Sherry that the attacks on this schedule by both Senator Murray and Senator Joyce seem to bear witness to a preoccupation with private equity activity, which is rather odd, with great respect, because this bill does not deal with that per se. The bill is entirely neutral with respect to the nature of the foreign investment involved; it does not bias the regime one way or another. It does seem that this schedule is a vehicle for those currently concerned about private equity activity to launch an attack on that private equity activity.

As Senator Sherry has pointed out, there has been some increase in private equity activity. I would draw the attention of the Senate to what the RBA has recently said about this matter of private equity, given that it seems to be the subject of this debate, albeit that it really has almost nothing to do with this schedule. But, as they note, LBOs—leveraged buyouts by private equity firms—account for about 15 per cent of corporate merger and acquisition activity, compared with five per cent in recent years. So, yes, it has increased from a very low base but is still relatively small—15 per cent. They note that most of the increase is attributable to an increase in the average deal size rather than the number of deals that are occurring.

As the RBA also notes—we should keep this in perspective—private equity LBOs account for less than one per cent of the value of the corporate sector as a whole. So, while Senator Sherry said there are commentators who say that this is a matter we should keep an eye on, I think we have to keep this whole issue of private equity investment in some perspective, as the RBA quite properly has noted.

We should also keep a proper perspective on this matter in relation to the fact that at the end of the day Australia is master or mistress of his or her own destiny—whichever way you like to look at a nation. We have in this country a foreign investment review regime which preserves our ultimate authority and sovereignty in this matter. The Foreign Investment Review Board mechanisms ultimately allow the government to act in the national interest with respect to any foreign investment that the government of the day believes to be contrary to the national interest, and the Treasurer, quite properly and with the full support of the cabinet, exercised that authority not very long ago with respect to the proposed Shell takeover of Woodside. That is demonstrable evidence that, at the end of the day, there is that ultimate sanction and preservation of the national interest. There are also, in respect of a range of companies operating in Australia, specific shareholder restrictions, as is the case in our national airline, Qantas, which, as everybody knows, has a 49 per cent cap, one that the government has no intention of removing. So perspective is important to keep in mind in relation to this matter.

I do not think there is anything else I would like to add. I just want to say that I think it is important to remember that what we are doing is aligning our tax regime with virtually all of our principal trading partners and OECD partners. I point out that the argument about discrimination is somewhat misplaced, given that what we are seeking to do is to ensure that foreign investors here are treated in the same way as Australian companies investing overseas. We should not ignore the tremendous, wonderful fact that there are many Australian companies active overseas—something we encourage.

There are something like a thousand Australian companies active and having invested in the United Kingdom and, through the UK, in Europe. There are hundreds of Australian companies active in the United States. What Westfield is doing in the United States, and what Macquarie is doing, is magnificent and something that all Australians should be proud of. The Australian companies active in those foreign markets benefit from CGT regimes like the one we are proposing to implement in Australia through this schedule. So in fact it will end a discrimination by ensuring that foreign investors are treated in the same way. I think that is the prism through which this must be seen. We want Australian companies investing overseas. We want them to be able to invest overseas. We want them when they invest overseas to be treated properly. They are treated by the United States and the United Kingdom in the same way that we now propose through these amendments to treat foreign investors investing in Australia.

Senator Sherry is quite right to say, and I have also pointed this out, that it is a constant responsibility of Australian governments and alternative governments to ensure that this country’s policy framework is established in a way which continues to attract foreign investment. Foreign investment is much more important to this country than I think most people realise. It does bring higher rates of economic growth, higher rates of employment, higher rates of innovation and R&D, higher employment conditions, and technological transfer, which is becoming even more important as every day goes by.

I know this is not an easy issue for some, and I respect the positions that Senator Joyce and Senator Murray bring to this debate. But I ask them to keep the private equity issue in perspective. If they wish to bring proposals to the government as to the way in which private equity as an issue should be dealt with, our doors are open. But I do not think consideration of this proposal should be warped or biased or seen through the prism of any concerns that may be held about private equity per se.