The Australian financial services sector has massive export potential, but a number of regulatory changes are needed before the sector can take advantage of it, according to the Financial Services Council.
Commenting on the release of the FSC/UBS State of the Industry 2017, FSC chief executive Sally Loane said offshore funds account for only 3.6 per cent of the Australian financial services sector’s funds under management.
This compares less than favourably with Hong Kong and Singapore, according to the FSC, where 60 per cent and 80 per cent of financial services are exported, respectively.
“We at the FSC talk a lot about the potential for our funds management expertise both products and services to be exported, it is still such a small percentage,” she said.
Ms Loane said this low figure owed partially to the large demand within the domestic market, but also to a number of barriers, such as the current Australian withholding tax system.
“We’ve got a complex system in this country, it puts off investors, and we have members who tell us every day that they get a lot of interest from clients into investing into our funds that are managed here in Australia, but when they run up against this withholding tax, it’s a significant barrier,” she said.
Ms Loane said simplifying this would help encourage foreign investment, as would the introduction of corporate collective investment vehicles (CIVs), which she said would be “much more attractive” to Asian investors.
The government is currently consulting on a potential CIV regime as well as the accompanying withholding tax. However, industry consultant Tria Investment Partners has expressed scepticism about the appetite for CIV funds in Asia.