Why foreign investment underpins growth and prosperity
A 20 per cent drop in foreign investment in new commercial buildings would slash Australia’s annual GDP by $3.2 billion and cut $8 billion from federal government revenues, a new report reveals.
Benefits of Foreign Investment in Real Estate, developed by ACIL Allen Consulting for the Property Council, finds that foreign investment is vital to the strength of the Australian economy.
Property Council chief executive Ken Morrison says the report, released at the Property Leaders’ Summit in Canberra yesterday, responds to ongoing union and political campaigns against foreign investment.
“This report answers the myths around foreign investment in real estate. Foreign investment in real estate underpins growth, keeps people in jobs and contributes to our national income.
“Foreign investment in real estate gets new projects off the ground, increases housing and office stock, boosts our national capacity and increases tax collections to all levels of government.”
Morrison says taxes on foreign investment are taxes on Australia’s attractiveness as a place for investment.
“The critics of foreign investment argue that it drives up house prices. According to Treasury, the presence of foreign investment adds just $80 to $122 to the price of a Sydney or Melbourne home,” he says.
The modelling also reveals the impacts that Australia could expect from lower levels of foreign investment in residential and commercial real estate.
The report finds that a fall in foreign investment in new commercial buildings of 20 per cent would result in a cumulative fall in Australia’s GDP of $21.4 billion over 10 years, reduce annual GDP by $3.2 billion and result in a loss of $8 billion in Commonwealth revenues and $2 billion in state revenues.
In total, the loss of GDP would be akin to the loss of Australia’s coal-fired electricity industry.
If foreign investment for new residential dwellings fell by 20 per cent it would reduce Australia’s economic output by a cumulative $14.8 billion over 10 years, reduce annual real GDP by $2.3 billion and result in a $5 billion loss in Commonwealth revenues and $1 billion in state revenues.
In total, the loss of GDP would be equivalent to losing three times Australia’s renewable energy industry.
Currently foreign investors directly fund $20 billion in commercial real estate. Approved foreign purchasers funded up to $7 billion in residential development in 2015-16.
The Property Council is not arguing for a less stringent system, Morrison says, but is “warning of the dangers of a political and media culture that seeks to decry foreign investment”.
Foreign investment has played an integral role in Australia’s 26 years of economic growth, Morrison argues, and “taxing and discouraging new foreign investment will result in a loss of jobs and national economic income during a time when it is vitally needed”.