Commercial Rental Markets

The Hon. T.J. STEPHENS (14:59): I seek leave to make a brief explanation before asking the Treasurer a question regarding commercial rental markets.

Leave granted.

The Hon. T.J. STEPHENS:The Australian published an article by Michael Owen today, highlighting the fact that the commercial rental market in Melbourne was spiking. He cited that interstate cities had an opportunity to seize on this rise as an opportunity to attract business investment away from Victoria. In this article he lists Adelaide, with proposed cuts to land tax rates, as having the potential to benefit from this. My question is: can the Treasurer outline what other incentives the government has in place to attract organisations from interstate?

The Hon. R.I. LUCAS (Treasurer) (15:00): I thank the honourable member for his question. I think Mr Owen's story refers to a recent post-budget presentation that I did, and then a panel session that followed afterwards. I think the gentleman's name might have been Mr Borger from Charter Hall. A range of questions was asked about this particular issue. I was interested in the response from the gentleman from Charter Hall. I guess he alerted other state jurisdictions to the potential for further investment in their states given what he characterised as the overheated nature of the Melbourne property market. In particular, I think he might have referred to the Docklands precinct in Melbourne and indicated that other state jurisdictions should be looking at attracting companies like their own to invest in South Australia.

With due respect, I think that Charter Hall are already very significant investors in South Australia. I forget the exact quantum of the level of their investment in Adelaide and in South Australia, but they have invested in the past and are investing at the moment in terms of the Adelaide property market. They are not just talking the talk, they are walking the walk in investment terms and are investing in Adelaide.

We welcome that from a new government's viewpoint. As we supported the former government's changes, it would be churlish for me to say that maybe they came a long time after the GST deal of 2000-01, but the reduction over three years—and I think the final tranche we have approved from 1 July this year, which has removed stamp duty on commercial property transactions—we see is a competitive advantage for South Australia in terms of attracting investment.

The government's announcements in this budget, in terms of trying to be more competitive with other jurisdictions in terms of land tax—in particular, on commercial properties but on all properties, investment properties—are important to potential investment attraction. Because we don't have the funding, as we are trying to clean up the mess left to us by the former Labor government, to make those changes immediately, this budget envisages those land tax changes occurring from July 2020 onwards. They involve both an increase in the threshold but, more importantly, in terms of commercial investment, reductions in the top rate of land tax for aggregate property values above just over $1 million.

Our current land tax rate is 3.7 per cent and we are proposing to reduce that to 2.9 per cent. Many of the other states have land tax at that particular value, in and around somewhere between 1.5 per cent and 2 per cent or the low 2 per cents. We are still, even with the reductions we are proposing, uncompetitive and that is why many commercial property investors have been investing, not unreasonably from their viewpoint in terms of their shareholders, in the western suburbs of Sydney and in parts of Melbourne up until recently in terms of their commercial property investment. I think what was important, in terms of what the gentleman from Charter Hall was saying, is that, even though the land tax rates are attractive in Melbourne, maybe other factors in that market will see commercial property investors look at other state jurisdictions like South Australia.

In terms of what we need to do, we obviously need to do more of what this government is seeking to do in terms of the culture shift, in terms of the direction of the budget; that is, to try to create jobs in South Australia, to try to create economic growth through having a nationally and internationally competitive cost base for our small and medium-sized businesses in South Australia, so more of the same in terms of removing payroll tax for all small businesses in South Australia, something which the Labor Party campaigned against prior to the last election, much to I think their cost amongst the small business community here in South Australia.

So, it is those sorts of policy changes—removing red tape and deregulating—the government's decision, which the Labor Party tried to prevent. The establishment of a productivity commission—a sensible, rational, productivity commission in South Australia—is all about seeking to reduce red tape and regulation in South Australia and trying to encourage an investment climate in South Australia that encourages the people, like the gentleman from Charter Hall and others, to say, 'There's a new government in town. There's a new approach to running the state. There's a new approach to business investment and attraction. Perhaps some people in the other states need to open their eyes and have a look at Adelaide and South Australia as a potential investment market for the future.'