The Department of Immigration and Citizenship has confirmed the 500th significant investor visa (SIV) has now been granted – out of more than 1,300 applications lodged – equating to $2.5 billion in investment inflows and an additional $2.89 billion proposed to be invested in complying investments under the scheme.
However, despite the government’s stated intention for the SIV program to provide a “boost to the Australian economy”, Baker & McKenzie partner Bill Fuggle told delegates to the Association of Independently Owned Financial Professionals conference in Sydney that the financial services industry is missing out on a substantial customer opportunity.
“The problem is that most of this money is not going into vehicles advantageous to the financial services industry – most of it is just going straight into government bonds,” Mr Fuggle said.
“So there’s not a lot of joy in that [for financial services], but presumably it’s good for the government in that they can attract more revenue at very low interest rates.”
The commercial lawyer said that Chinese cultural norms are driving the penchant for government bond investment, with upwards of 90 per cent of SIV holders hailing from mainland China.
“If you are a person that has spent your whole life in China you have a very different view of the importance of government than someone who spent their whole life in Australia,” he said.
“While government in Australia is important it is certainly not the be all and end all, whereas in China the government has a very significant role.
“Many of these immigrant investors believe that if they invest in government bonds that will make the government happy with them and therefore increase their chance of getting [permanent residency or citizenship].”
However, Mr Fuggle also said this “ongoing cultural issue” was also an opportunity for financial product manufacturers and fund managers, since “a fair whack of that $2.5 billion” may flow out of government bonds as investors realise investment in this asset class is unlikely to curry favour with immigration officials.
An education process is required to inform immigrant investors of the range of investments on offer in Australia and their benefits, Mr Fuggle said, adding that there therefore may also be an opportunity for retail financial planners.
In October, trade and investment minister Andrew Robb argued SIV investors should be encouraged to invest in higher-risk investments such as small-cap companies or start-ups.
