Federal Assistant Treasurer Nick Sherry has launched a booklet outlining the benefits of Islamic finance and aimed at dispelling misconceptions.
The Government has considered Islamic finance in various reviews and reports, and Sherry said this was because it recognised the potential for creating jobs and wealth for Australians.
The Board of Taxation’s review of Australia’s tax laws, for example, will examine any impediments to the provision of Islamic finance, banking and insurance products, along with a cross-Government regulatory review focused on any regulatory barriers.
Speaking at the launch of the publication in Sydney this week, Sherry said the review was not about creating special treatment.
“Rather, it is about creating a level playing field for the provision of Islamic financial products into the Australian market,” he said.
Sherry also referred to the Johnson Report, which identified Islamic finance as a possible means of accessing offshore pools of savings from the Middle East to provide more diversified and competitive funding for Australia’s investment needs.
He added that the principles under which Islamic finance operates meant Islamic banks used fewer risk-hedging techniques and instruments.
“As the world learnt to its cost, the excessive use of risk-hedging instruments led to the growth of ‘toxic assets’ during the global financial crisis,” he said.
“Importantly, the Shariah prohibition against highly speculative activities not only helps to protect the economy against abuses and distortions, but also forges a closer link between financial activity and the real economy. This maximises the efficient allocation of capital and resources, helping to create jobs and boost sustainable growth.
“The Australian Government firmly believes that Islamic finance can increase the depth and sophistication of our financial markets.”
Sherry said he had received negative feedback from some members in the community since his visits to the Middle East and the announcements about the Government’s interest in Islamic finance.
“Some of the issues of concern include open claims that Islamic finance is used to spread terrorism, that it is a vehicle to promote the world domination of Islam over other faiths, or that it is designed to replace conventional financing,” Sherry said.
“So we have a challenge in front of us — and that is to continue the community dialogue, to increase awareness of the truth and to highlight the facts.”
He added that the booklet, ‘Demystifying Islamic finance: Correcting misconceptions, advancing value propositions’, would go some way to dispelling these misconceptions.
