25  October, 2022

Federal Budget changes will negatively impact foreign investment into Australia

SYDNEY: The Australian Investment Council is disappointed in tonight’s Federal Budget measures which will adversely impact Australia’s ability to future attract foreign investment but cautiously welcomes other measures aimed at enhancing Australia’s innovation and manufacturing landscape, and in deploying skills within the domestic economy.

Foreign Investment

The private capital industry is disappointed the Government has not heard the loud call to enhance Australia’s collective investment vehicle regime by scrapping the Limited Partnership Collective Investment vehicle (LP CIV) announced in the 2016 Federal Budget and promised as part of Australia’s adoption of an Asian Region Funds Passport regime.

Tonight’s announcement that changes to Australia’s thin capitalisation rules will include abolishing the worldwide gearing test and arm’s length debt test for related investors, as well and not providing any grandfathering for existing investments is surprising and disappointing. However, the Council welcomes the retention of the arm’s length test for third party lenders.

As a net importer of capital, Australia’s economy relies on a dependable and steady flow of foreign investment to drive economic growth and job creation. The scrapping of the LP CIV and the thin capitalisation changes, together with the doubling of FIRB application fees send a negative signal to international investors that Australia is not open for business at a time when other countries, like Singapore, are doing their best to attract foreign investors to their shores.

More Permanent Migration Visas

Australian jobs rely on a steady flow of domestic and offshore capital to support investment into growing businesses across all industries and regions within our nation. Reallocating the visa mix to ensure regional areas are well supported to ensure there are sufficient skilled workers is a critical step for sustaining these local economies over the short to medium term.

The Council welcomes the increase in permanent migration visas from 160,000 to 195,000 in 2022-23 and the increased allocation of resources to free the backlog of visa applications in the months ahead.

We look forward to working constructively with the government on the review of Australia’s immigration system.

National Reconstruction Fund

The Council supports the National Reconstruction Fund for key industries where Australia already is or could be world leaders.

The Council is disappointed that the establishment of the National Reconstruction Fund has come at a cost of previously strategies including the Modern Manufacturing Strategy and the Entrepreneurs program.

More TAFE and university places

The Council welcomes the 480,000 fee free TAFE places and 20,000 new university places to indigenous Australians and socially disadvantaged groups recognising higher education's long term social and economic impact, as well as the importance of reskilling Australians for a future technology-based economy.

Upgraded NBN

The Australian Investment Council has advocated for the NBN to be upgraded from FTTC and HFC to FTTP as more people work from home. Building a digital future will require further investment in technological infrastructure to ensure businesses and individuals have access facilities that are world class. Upgrading the NBN to a gold and future-proof FTTP standard and building 5G and future 6G capabilities will be integral to this process.

Cost of living

We welcome the Government’s recognition that cost of living pressures are affecting many Australians by expanding the childcare subsidy to cover 90% of the cost of most working Australians. The private capital industry welcomes measures that enhance Australia’s productivity by supporting working parents at a time when childcare is becoming more expensive.

The Council also supports the move by Government to provide parental leave funding to 26 weeks.

Building Affordable Housing

The Council has been a long-term supporter of Federal and State governments working together to achieve very targeted programs for affordable housing which do not place additional pressure on existing housing prices. We welcome the use of long-term socially responsible capital through public and private investment to help solve the nation’s chronic shortage of affordable housing. The Council looks forward to participating in the Treasurer’s Roundtable to continue the dialogue on how governments can work with private capital on this key area.

For further information, please contact:

Robyn Tolhurst
Public Affairs Manager
Australian Investment Council
E: [email protected] | M: +61 436 388 919

About the Australian Investment Council

The Australian Investment Council is the voice of private capital in Australia. Private capital investment has played a central role in the growth and expansion of thousands of businesses, which when combined represents a multi-billion dollar contribution to the Australian economy. Our members are the standard-bearers of professional investment and include: private equity, venture capital and private credit funds, alongside institutional investors such as superannuation and sovereign wealth funds, as well as leading financial, legal and operational advisers. The Australian Investment Council requests its name always appear in full and not abbreviated or as an acronym.