Just because Australian governments can't do tax reform properly with respect to the tax treatment of personal income, corporate tax rates and the tax treatment of housing does not justify trying to kill off foreign investment in other parts of the economy, your solution does not relate to the problem at all. If there is an over-allocation or malinvestment in property and you believe that the problem is tax driven you don't solve it by crippling another unrelated part of the economy.
At the moment the Australian government is saying you can speculate and buy real estate and the only real barriers are the lumpy asset class allocation and stupid state stamp duties that have all sorts of distortionary and adverse effects on the market and labor mobility, but if you take a risk and invest in the stock market and put the capital to work and the company has a capital gain or pays a dividend, then you get smashed with a capital gains tax. If you skew the risk and returns don't be surprised that the rational economic response is to minimize risk and maximize returns.
I agree with some that the lack of diversity in foreign investment is more of a problem (i.e. China), if we have diverse sources of foreign investment and export partners then the economy is less prone to black swan or region specific external shocks. There is lots of money sloshing around the world so makes sense to use some of it to keep capital intensive industries growing rather than not have them. In order to do that you need a competitive tax and regulatory regime to attract long term investment - whether that's local investment or overseas investment. If people against foreign investment were listened to then we wouldn't have the jobs, revenue and expertise of Broken Hill or Mt Isa, a lot of coal production out of Central QLD or the Iron Ore mines in the Pilbara. All at least partly funded by foreign investment.
Indonesia has one of the worst reputations for foreign investment and the Indonesian economy is growing thanks to demographics, despite their mining legislation not because of it. Billions of dollars is sitting in the ground in Indonesia that could be used to grow their economy but the investment environment is too unpredictable. Until the Indonesians learn that, they will stay being a third world country.
