Monday, 22 February 2016
Foreign land ownership has long sparked debate in our country. Those in favour say foreign investment is needed to ensure established and emerging industries can meet their full potential. But others say there needs to be greater scrutiny of those buying up Australia's prime pastoral and residential land. I wish to contribute to the debate and to explore the broader issue of foreign land ownership at length and the action the government is taking to strengthen foreign investment rules.
Since being elected, this has been a topic often raised with me, with the major concern directed at land purchases. It is no secret that people are worried about the buy-up of Australia's agricultural land by foreign entities, and about where the produce and profits will go.
In the 1980s, we were told we must end the onslaught of Japanese investment in Australia, in our hotels in particular. Now we are hearing similar concerns in other areas. So I think it is reasonable and necessary to explore this matter in some depth.
I strongly believe it is important to look at this with a very open mind. There are definitely two sides to the argument when it comes to foreign investment.
Firstly, the government welcomes foreign investment, and governments—whether Liberal or Labor—have welcomed foreign investment over the decades. Australia was built on foreign investment, first from Britain, then the United States and then, more recently, Japan and China.
What I find most surprising is the level of fear, given the real facts and statistics. The United States and the United Kingdom are the two top sources of investment in Australia, making up some 45 per cent of total investments, ahead of Belgium, Japan and Singapore. Over the decades, the United States and the United Kingdom ranking very high up in terms of the foreign investment in Australia has been fairly similar. China, in comparison, is ranked seventh. Yes, levels of Chinese investment have grown since 2005, but the total value does not compare to that of other countries—particularly the United States.
As the former Minister for Trade and Investment stated:
History teaches us several important things about foreign investment. It shows that Australia has always needed foreign direct investment to supplement its own thin capital markets and savings.
Foreign investment provides significant benefits for Australia. But why do we need foreign investment? Foreign investment has played a crucial role in driving productivity and economic growth, and contributing to the employment opportunities and living standards of Australians. It provides additional capital for economic growth, creates employment opportunities, improves consumer choice and promotes healthy competition—something every Australian would agree is important. It can also deliver improved competitiveness and productivity by introducing new technology, providing much needed infrastructure, allowing access to global supply chains and markets, and enhancing Australia's skills base. Without foreign investment, production, employment and income would all be lower. Investment equals jobs and growth. Without investment, we would not have been able to create the strong national industries that underpin our economy, and each of these industries is a creator of Australian jobs.
When we have an economy challenged as it transitions, jobs are so important. I want to go through a couple of examples to illustrate this. Take the British investment in our defence and aviation sector through companies like BAE Systems, who employ around 1,000 people in South Australia, and Cobham, who employ hundreds in Adelaide and around Australia. There was the Japanese investment in hotels and tourism in Queensland during the 1980s. We could go on with other examples, such as United States investment in defence in our country and in our industry, including by the technology companies, whether it is Google or Facebook, among others.
Investment means innovation, skills development and entrepreneurship—some of which the American investors bring in spades—and all are important drivers of job creation. The link between investment, jobs and growth is real. The evidence is here and it is strong. As Andrew Robb has told this place before,
… new research from the Economist Intelligence Unit … confirms foreign direct investment has a positive, causal impact on employment in Australia. In fact, modelling based on data since 2000 shows that a $1 billion increase in FDI would result in around 1,000 Australian jobs being created.
For those interested, Australia attracted over $140.1 billion in direct, new foreign investment in 2014—up 17.8 per cent on the 2013 figures. Based on the previously mentioned modelling, this investment supports 140,000 jobs throughout our country.
The Business Council of Australia recently released a report titled Foreign attraction: building on our advantages through foreign investment. The report states that research shows that foreign investment inflows increase our capital stock, lift productive capacity and output, raise demand for labour and boost real wages. Specifically, a 10 per cent increase in foreign direct investment inflows over the next decade is estimated to increase GDP by 1.2 per cent, or $16.5 billion, by 2020. Yes, they are big numbers. Yes, they are significant, but they help our economy.
The benefits of foreign investment in Australian agriculture were explained by Martin Newnham, CEO of AgCAP, to The Australian on 11 December 2014. In addition to managing farms owned by the Sustainable Agriculture Fund, AgCAP also manages two properties leased by SAF from US global agricultural fund, Westchester. He says:
They own the land and provide the capital and we effectively lease it from them and provide the local expertise and management. We have our own local farm managers and use local contractors so there is a real benefit for rural communities; but it's their money that ensures the properties are beautifully presented, maintained and run to the highest occupational health and safety and governance standards—that's what capital brings.
Foreign and other institutional investment also brings the advantages associated with corporate management. This includes discipline and a wider range of resources in production, planning and marketing. This benefits the assets in the long term. Investments managed by AgCAP benefit from their deep local operating expertise, experience working with Australian and foreign institutional investors, and strong knowledge and access to opportunities in the Australian agricultural sector.
The resource sector is another one that has greatly benefited from foreign investment. Since the gold rushes in the mid- to late-1800s, when London and New York invested in Bendigo here in Victoria and Coolgardie in Western Australia, Australia has welcomed foreign investment in resource projects from around the world. In 2014 it was $265 billion. The investment comes from all across the globe—Canada, the United Kingdom, the US—and increasingly from our key commodity trading partners like Japan, China, Korea and India. Australia has also experienced considerable investment from countries such as Switzerland, Brazil and South Africa. We have a strong history of welcoming foreign investment in the resources sector, and this has benefited our country in terms of tax revenues and in other areas.
But it is important that we look at the national interest, and that is where the government has focused in recent terms. The current government has implemented a number of measures, which were election commitments, to strengthen our foreign investment rules. From 1 December 2015 we saw the government's robust new foreign investment regime come into force, providing stronger enforcement and a better resourced system with clear rules for foreign investors. Changes now in effect provide greater compliance powers to the tax office and introduce strict new penalties for those breaking the law. We have given the ATO full responsibility for enforcing residential real estate purchases by foreign citizens, and existing criminal penalties have been increased.
While foreign investment in agriculture provides important economic benefits, we have acted to improved scrutiny and transparency around foreign ownership of Australia's agricultural production. The average farming business is smaller than other businesses in the economy, and applying the general business threshold of $252 million excludes a large part of the agriculture sector from foreign investment screening. Hence, from 1 March 2015 the screening threshold for foreign purchases of agricultural land has been lowered from $252 million to $15 million, based on the cumulative value of agricultural land owned by that investor. The government has also introduced a $55 million threshold for direct investments in agribusiness. Australians can have confidence that investments into agriculture will be scrutinised to ensure that they are not contrary to the national interest. The government is also expanding the agricultural land register to include residential land and water entitlements. This package is long overdue and includes modernising the foreign investment framework, reducing red tape and providing greater certainty for investors and the community.
Since coming into force, this government has played an active role. Recently the government blocked the sale of Australia's largest family owned cattle property portfolio, S Kidman and Co, to foreign buyers on the basis that it was not in the national interest. I have raised this matter with the Treasurer and the Minister for Agriculture. We know that a few years ago the federal government also turned down a bid by US grain giant Archer Daniels Midland for a takeover of Australia's biggest grain handler on the eastern coast, GrainCorp. This was also deemed contrary to the national interest. The government has ordered the sale of a number of residential properties, including a mansion in Point Piper owned by a Hong Kong based group and others.
The coalition government's measures represent the most significant reforms to Australia's foreign investment framework in forty years. We are committed to strengthening the system so that Australians can be confident that foreign investment will not be contrary to the national interest. Foreign investment has underpinned the development of our nation, and we must continue to attract the strong inflows of capital, but it must be in the national interest.