THE SENATE will conduct an inquiry into private equity in recognition of its growing significance in the Australian market.
According to Democrats corporate affairs spokesperson, Senator Andrew Murray, the inquiry has won the support of the Coalition and Labor.
“Private equity funds are legitimate market participants that add variety and choice to investment vehicles. But Australia has to be aware of the higher risk they can bring to some markets,” Murray said.
“We have the most dynamic and successful business market Australia has ever seen, with record levels of mergers, acquisitions, profits and tax revenues. At present, it is also the safest market Australian investors have ever experienced,” he said.
“If private equity funds broaden their market activity substantially, they can affect large sectors of our economy. We need to assess what consequences that may have.”
Murray noted that private equity may often include investment by funds holding the superannuation savings or investment monies of millions of Australians.
He referred the following to the Economics Committee for inquiry and report by 20 June 2007: an assessment of domestic and international trends concerning private equity and its effects on capital markets; and an assessment of whether private equity could become a matter of concern to the Australian economy if ownership, debt/equity and risk profiles of Australian business are significantly altered.
Also referred was an assessment of long-term government revenue effects, arising from consequences to income tax and capital gains tax, or from any other effects; an assessment of whether appropriate regulation or laws already apply to private equity acquisitions when the national economic or strategic interest is at stake and, if not, what those should be; and an assessment of the appropriate regulatory or legislative response required to this market phenomenon, if any.
“The scale of private equity now in play means policy makers must assess the potential effects,” Murray said. “The Senate inquiry will be a key contributor to any future policy decisions.”