Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

That is seven per cent, Senator Ronaldson. The point the Labor leader was making was that Japan’s tax treatment of seven per cent is considerably below Australia’s treatment of 30 per cent and, therefore, there is obviously a great incentive to use Japan, rather than Australia, as a financial centre for the purposes of this form of investment. Labor policy is supported by IFSA, Investment and Financial Services Association Limited, and the property management association. This is not a policy dreamt up by Labor in isolation; it is a policy that has been actively encouraged by a range of experts in the funds management area. We have to narrow the difference in the tax treatment. Labor agrees with that policy. Indeed, as the Treasurer said, ‘This is nothing more than rewarding foreigners with the hard-earned tax dollars of Australians.’ Labor’s costing is $30 million, and I will get to the costing in a moment. I will also get to Mr Costello’s contribution on the costing in a moment—a view which, presumably, Senator Ronaldson shares.

In the context of a tax incentive, $30 million is very modest indeed when compared to a whole range of other tax incentives that we have in our system. Labor argues that it is well worth paying this price if it adds to the attractiveness, particularly in Asia, of building Australia as a centre for financial services. It is a particularly modest price in the context of these outrageous advertising propaganda campaigns that we are currently seeing. In the context of the government’s so-called advertising of industrial relations or superannuation changes, $30 million pales in comparison. So $30 million is a modest price for Australian taxpayers to pay to change the withholding tax regime to make Australia more internationally competitive in this very important area and to build on Australia’s future as a financial funds management centre.

I turn now to the issue of the costing. The night that the Labor leader, Mr Rudd, gave his budget in reply speech and announced this Labor policy, the Treasurer was obviously listening. He gave a doorstop interview immediately afterwards. He said that Mr Rudd had got his costing of $30 million wrong and that in fact the costing was $100 million. How on earth could the Treasurer, having stayed until the end of Mr Rudd’s speech, get a costing on a Labor policy which he had only just heard announced? That is if indeed he got any costing done at all. I suspect he got no costing. I suspect the Treasurer made up a figure when he went out to do his doorstop, because there simply was not time for him to get an accurate figure in that five minutes when he walked from the House of Representatives chamber to do the doorstop. As it turns out, we understand that he had a costing—but it was a costing based on zero tax, not 15 per cent. He gave an inaccurate costing based on a false analysis of Labor’s policy commitment. It is Mr Costello who should fess up to misleading the Australian people with the inaccurate costing he gave. So not only was Senator Ronaldson incorrect last night in his critique but, even worse, the Treasurer, Mr Costello, gave an inaccurate costing shortly after Mr Rudd announced the policy.

To conclude my remarks on this issue, in the debate yesterday I did refer to the impressive level of savings in funds management in Australia. I indicated that, in terms of total assets under management, Australia, with a shade over $1 trillion under management, was fourth largest behind the USA, Luxembourg and France. That is particularly impressive if you compare us to other significant economies—for example, the UK has about $950 billion, Hong Kong has about $760 billion and Japan has a shade over $700 billion. If you look at those levels of savings, Australia does very well. It punches above its weight in terms of funds management.

As I indicated earlier, Labor was supported in its policy approach by both IFSA and the property association—and for good reason. With the figures that I have given, Australia should be proud of its funds management financial services sector. It is substantially underpinned by compulsory superannuation, which the current Prime Minister described as ‘silly’ when he opposed it back in the late 1980s. Given the way the Treasurer, Mr Costello, carries on about compulsory super, you would think he had actually introduced it. But he actually opposed it as well, and he used a much rougher description than ‘silly’. Anyway, that is the historical context.

We should be proud of our funds management financial services sector in Australia. There is a need to encourage Australia to export more of those services and, with such a significant funds management sector, to be at the very least a regional centre in Asia—if not because we have the fourth largest funds management sector in the world by volume then because flowing from that are a range of other services that can be exported as part of a total package. These include asset management; investment consulting; platform delivery; custodial services; financial services; IT and software; actuarial services; legal and accounting services; compliance and risk monitoring; investment performance; research and reporting; education and training services; portfolio administration services; and advice distribution. Australia leads the world in many of these areas. Labor’s vision is one of greater encouragement to these sectors of our financial services sector, exporting into Asia in particular, and the expertise that we have in these areas off the back of the sheer size of our fund management system and off the back of Labor’s introduction of compulsory superannuation—and we see it as a good thing. We have a vision of people working in wealth management and its various aspects, where incomes are higher than average and where there is real jobs growth over time. We should be proud of it and be encouraging its export.

As I have mentioned, the advantages with Asia are obvious. We have a shared time zone and, at the moment, we are the largest funds management centre in the Asian region. But there is also significant economic growth in China and India, for example, and significant reform in terms of their legal financial services sector. They will need the sorts of services that I have just referred to in which Australia has ample expertise. My final point is that most of the Asian countries have redesigned or are in the process of redesigning their pension funds systems and, here again, Australia has an obvious advantage.

Labor is proud of the policy it has presented to encourage the development of Australia as a funds management centre in the Asian region and to encourage exports. That is what its policy on withholding tax is designed to do. It is a modest cost—certainly not the cost the Treasurer has claimed—in the context of other tax concessions in our system. It is well worth that cost because of the long-term benefits it will bring to this expanding and very important sector of the Australian economy.