SUBJECTS: Financial Services Hub Summit, residential-backed securities
The Financial Services Hub Summit has been held in Sydney today, aiming to develop strategies to bolster Australia's position as a regional banking hub.
But is there room in the Asia-Pacific for another major player? Well Ky Chow spoke with Assistant Treasurer Chris Bowen, who is heading up the summit and began by asking Chris Bowen what Australia has that the power-houses in Hong Kong and Singapore don't.
CHRIS BOWEN:
Well we have the fourth-largest pool of funds under management in the world and are the largest in Asia. That means we've built considerable skills.
We are very good at managing our own money, what we haven't done is try to manage other people's money and that's what this summit is all about - identifying the competitive barriers to us exporting our financial services more generally and funds management in particular.
KY CHOW:
In his address, the Prime Minister alluded to Singapore having favourable tax-treatment for funds. Is that an area which we perhaps could change to make ourselves more alluring?
BOWEN:
Well of course we've already reduced our withholding tax-rates from the highest in the world at 30% to effectively the lowest at 7.5%, as well as the reference to the board of tax, for our managed investments tax regime, and changes to division 6C to improve the operation of the funds management tax regime.
So we're already doing some of these things and if there are more ideas to come out of this Summit as to what more we could, or should, be doing then we'll certainly do them.
CHOW:
The Prime Minister mentioned that any hub for Asia for western investors would need to be a place where they could turn for deep knowledge of Asia, including its culture. So from that point of view alone, wouldn't that disqualify Australia in favour of places like Hong Kong and Singapore which are much more recognised Asian centres?
BOWEN:
Well not necessarily. This is one of the challenges for it, but we are of course located in Asia and we are seen by the rest of the world, by Europe and the United States, as somebody who does have insight into Asia and we're often asked by those people what's happening in Asia. So we need to become much more closely linked with Asia, I think that's the point the Prime Minister was making, but that doesn't mean we're not linked at the moment, but there's always deepening that can be done.
CHOW:
Hong Kong and Singapore are already very well known for being investor-friendly; Hong Kong's the friendliest economy in the world. They're all closer as well, I mean, I just find it difficult to see how people would come all the way to Sydney, then back-track to go back to Asia itself.
BOWEN:
Well, we need to make ourselves more investor-friendly, so we compete with Hong Kong and Singapore. Hong Kong and Singapore have some advantages over us and we have some advantages over them. We need to make sure our advantages are greater than theirs.
CHOW:
Greg Medcraft, from the Australian Securitisation Forum; he says that the Government has to intervene to help securitised lending and restore some competition to the home-lending sector. Is that a view that you're sympathetic to?
BOWEN:
For any Government intervention in the market you need to be very careful that you're not distorting the market in any adverse way. Of course, the residential-backed securities market has been through a difficult time, there are signs of its recovery and we would need to judge any actions that we take over the longer-term. Not a knee-jerk reaction to any particular problem at the moment, but to see what is sustainable and sensible in the longer term and that's the process we're going through at the moment.
CHOW:
Helping out securitised lending wouldn't be a knee-jerk reaction would it? This problem's been going on for a while. In fact, Greg Medcraft says that it's possible that the whole securitised lending industry could implode if there's not Government help and it may not just heal itself.
BOWEN:
Well I'm not sure that's the signals we're getting from the market. The signals from the market are that it is recovering, it's recovering slowly and there's some way to go. And it may not return to its previous level anytime soon. But I don't think that you can say that the residential-backed security market in Australia is dead. It may be having a good 'lie down', but it's certainly not dead and we need to judge our response sensibly over the longer term, not as a knee-jerk reaction to any particular issues at this particular time.