Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

Madam Acting Deputy President, I entirely agree with you. It transmogrified a company tax cut into further cash payments to households in order to shore up its support ahead of the introduction of the carbon tax on 1 July. You cannot make tax policy on that short-term a basis.

Yes, governments have to have flexibility, a capacity to change policy settings over time in response to changing circumstances, but we are talking here about a measure that was trumpeted as part of our efforts to promote Australia as an international financial centre. Lamentably, our efforts to do so have gone backwards in recent years. Singapore is growing as an international financial centre. Hong Kong is growing as an international financial centre. Shanghai is growing as a financial centre. Some of that growth is inevitable. As more and more of the axis or centre of gravity of world economic activity shifts towards East Asia, it will be centralised in places like Shanghai and Hong Kong. But the fact of the matter is that, with our highly educated workforce, our experience in the financial services sector, our first-class lifestyle, our IT base, our advantage in time zones and all the rest of it, we are in a good position to be an international financial centre, but we are losing that to Singapore, just as in a number of areas in recent years we have been losing our competitive edge. Our costs are going up relative to our competitors and today our competitors are not the US, the UK or Europe. That is not who we benchmark ourselves against in terms of economic competition. Today it is very much Asia, Africa and Latin America. Places in Africa which are getting their governance systems right and are promoting more favourable regimes for foreign investment are starting to attract, for example, big mining investment. If you are a miner in Western Australia you will look seriously at the costs and benefits of doing work in Africa as opposed to do further work in our own region, including within Australia.

The issue of competing against areas in our own backyard in industries like financial services is critical. Anything that sends the signal that policy settings are volatile, are easily changed and are at the whim of government is not good enough. We have to have certainty, stability and continuity going forward. These particular measures were held up by the Greens in the lower house and I commend them for that. They saw the economic implications of this in a nanosecond and said, 'We have to have a further look at all of this.' Again I say I commend them for it. We encourage the government to rethink these sorts of measures and to create greater certainty and stability for our investment regime.

Let me say something about the mining tax. Over the last couple of days we have had revelations by UBS, through the work of a very respected mining analyst, that they expect this tax to raise less than half what is projected in the government's forward estimates. This is a concern because there are obligations for increased government spending which are linked to the revenue generated by the mining tax. We have this volatile, cyclically-sensitive tax revenue source which is tied to relatively certain future government spending obligations. That is increasing the vulnerability of the budget to the economic cycle. It is creating a further budgetary headache down the track and will come on top of the budgetary headache created by the carbon tax. Not only will we have fixed spending associated with the carbon tax but also we will have the danger that the price—once we go to a floating carbon tax when it becomes a carbon price—will fall and will reduce revenue available to governments. These are budgetary issues which are looming on the tax front and this discussion is an opportunity to raise those points.