Jim Chalmers (Rankin, Australian Labor Party, Shadow Treasurer) Share this | Hansard source

Australia has long relied on foreign investment as an important source of capital to grow our economy, grow jobs and support our economic development. It can bring important benefits, including access to new technologies and management practices. But there can also be risks. We've seen a growing focus on national security risks associated with sensitive sectors and critical infrastructure assets in particular. Australia welcomes foreign investment, but we need to ensure it is in our national interest. This means having a fit-for-purpose, well-resourced foreign investment regime and robust arrangements to monitor and enforce compliance with this regime. It also requires foreign investment policies to be applied as clearly and consistently as possible, with appropriate and proportionate fees and penalties to provide investor certainty and maintain investor confidence in Australia.

The Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 will help enact substantial changes to Australia's foreign investment regime. The stated purpose of the changes is to ensure Australia's foreign investment framework keeps pace with emerging risks and global developments. In particular, the changes will allow the Treasurer to screen direct investments made after 1 January next year on national security grounds. While the government has reduced the monetary screening thresholds to zero dollars for the duration of the current crisis, these arrangements are only intended to be temporary. In more normal times, private foreign investors generally only need to notify the FIRB of a substantial interest in a business that's valued at over $275 million. This means that some small but sensitive proposals may not always be captured or receive sufficient scrutiny.

The bills that are before the House today include the following changes that are intended to come into effect on 1 January. Firstly, they introduce a new national security test, which requires a notification and screening of proposed investments in a national security business and national security land. The bills give the Treasurer the ability to call in certain investments on national security grounds and, as a last resort, the ability to impose conditions or force divestment to address national security risks. They strengthen the Treasurer and the tax commissioner's enforcement powers through increased penalties and a new set of monitoring and investigative powers. They expand the information-sharing arrangements to assist with the Treasurer and the commissioner's compliance activities and address national security risks. They make a range of changes to help improve the integrity of the framework and close potential gaps in the screening regime. They establish a new register of foreign owned assets to record all foreign interests acquired in Australian land, water entitlements and contractual water rights, and business acquisitions that require foreign investment approval. They introduce new fees for new actions established under all of these reforms.

As I said at the outset, foreign investment has always been important to us—important for jobs, technology, trade and the broader Australian economy. But we do need to ensure that that foreign investment is in the national interest and that the foreign investment regime keeps pace with emerging developments and risks, including those risks associated with our national security.

Labor's priority is to ensure these changes strike the right balance between welcoming that foreign investment, addressing emerging national security risks and ensuring foreign investments are in the national interest overall. While we support the broad intent of the bill, we do have some concerns about some of the details and how some of the changes will work in practice. These concerns were highlighted as part of the Senate inquiry which has recently concluded. These concerns are why I move the second reading amendment circulated in my name, which says 'whilst not declining to give the bill a second reading, the House notes the concerns and uncertainty around the implementation of this bill and the coalition government's broader failures on foreign investment'. I also indicate to the House that we intend to move a substantive amendment in the Senate to ensure that we can assess these changes once they're up and running, to make sure we strike the right balance.

On the changes that will be implemented with our support on 1 January, we need to have a look at those fairly soon after the implementation to make sure that our objectives are being satisfied and that we're going about this the right way, so that if we are not we have the opportunity to fix some of these arrangements. There is a lot of uncertainty, as I'm sure all sides of the parliament will acknowledge, in the business community about the operation of these arrangements. We need to give the people, the parliament and the government of the day the opportunity to have a good look at these laws in operation and make sure they're operating as they want them to.

In terms of our concerns with these bills, we have four. Firstly, the parliament's being asked to support bills which delegate much of the detail to regulations that haven't even been finalised yet. This makes it very difficult for investors in particular to understand how the bills will work in practice. For example, a number of industry and investor groups have raised concerns directly with us—and I assume with the government too—about the lack of clarity around the definition of 'national security business' and 'national security land'. Some business and industry groups are also concerned about the level of fees being imposed for certain transactions, with the exact fee levels to be set by regulations that are, again, still yet to be finalised. These uncertainties are particularly concerning given the substantial new powers and penalties that will be introduced through these bills. In our view the government should respond to these concerns raised in relation to the draft regulations and finalise the regulations as soon as possible.

The second concern is that the bills seek to introduce some substantial and complex changes to our investment regime at a time of heightened economic uncertainty. This legislation does have implications for a range of crucially important Australian industries, including resources, agriculture and many others. We can't afford for these changes to deter foreign investment and risk jobs as we recover from the worst economic conditions in almost a century. This makes it even more important for the government to issue clearer guidance and undertake investor outreach before the commencement of these changes, to make sure that their operation is well understood.

Our third concern is that it's important for the government to have sufficient resources to process applications in a timely way and to properly monitor and enforce compliance. The bills bolster information sharing and enforcement tools, but for that to be effective we need the government to be proactive in monitoring and enforcing compliance, including breaches of conditions. It was disturbing, to be frank, to hear recent evidence that there were only two staff overseeing compliance activities last year. While this has since increased, we have concerns about whether enough is still being done. As the Productivity Commission said in June:

While the Australian Government has recently announced that Treasury's compliance and enforcement powers will be expanded, it remains to be seen how these will work in practice.

Our final major concern is that we want greater transparency around how the foreign investment regime is working and the impact of these changes. There is no review mechanism to assess the impact of the new policy, which is a major omission, in my view, given the nature of the changes and the uncertainty around how they will work in practice. If the government hasn't got it right, we need the capacity to improve or fix the policy based on a clear assessment of how it's working. That's why I foreshadowed the amendment we are likely to move in the Senate to that effect.

While the rationale of the bills is sensible, like everything with this government, we need to be focused on the implementation and the follow-up. It's not the announcement that matters but the follow-up, the implementation—how these bills will work in practice. Many of what sound like sensible changes at face value have come too late, and some of them—not that the government will concede this—have come in response to some of the government's own failures on foreign investment over the last few years. We need look no further than the government's failure to properly scrutinise the Port of Darwin lease to Landbridge in 2015.

Because the government has left these changes so late, they are doing this as we recover from the worst recession in a century. That's not a great time to be creating more uncertainty.

By far the government's biggest failure when it comes to foreign investment has been their failure to monitor and enforce compliance. We have the announcement about conditions struck or expectations of one approval or another, and, unfortunately, we discover time and time again that there are very few occasions where those conditions have been followed up to ensure that they're happening. There has been a failure there. There has been a gap in the way the government has gone about it. It's partly about resourcing, but it's partly about commitment. They didn't even have adequate IT systems until this year's budget to analyse application data; it was still being done manually right up until the budget. That's why there have been some disappointing failures to monitor conditions, in particular. My colleague in the other place Senator O'Neill has done a good job of highlighting the failures on Alinta, for example. In 2017, the then Treasurer and current Prime Minister signed off on a deal for the purchase of Alinta Energy by Chow Tai Fook Enterprises. This year it was revealed that Alinta was not compliant with the data security conditions imposed by the Prime Minister and had been in breach of conditions for some time. The Prime Minister and the Treasurer failed to protect the privacy of over one million Australians, by failing to enforce their own foreign investment conditions.

Those are the specific issues about foreign investment, but, on investment more broadly, we have a serious problem in this country that's been neglected for too long. It has consequences for jobs, wages and living standards. We've had problems with business investment for some years, not just as a consequence of COVID-19 this year. Yesterday's national accounts showed yet another fall in business investment. The government was quick to blame this on COVID and pretend that our problems with business investment had just suddenly arrived with coronavirus. But the truth is that business investment over the life of this government, which is now in its eighth year, is actually down 30 per cent by one measure. And what is, I think, more devastating for the government's recent argument is that 80 per cent of the decline in business investment over the life of this government happened before COVID-19. So we've had an issue with business investment for some time. It's partly a story about energy policy uncertainty, it's partly a story about failure to support key sectors, like manufacturing, and it's partly a story about not doing enough to encourage investment in research and innovation and in commercialisation to turn our good ideas into good jobs here in this country.

These accumulated failures of long standing, when it comes to business investment, make it even more important that we get the foreign investment part of this story right. We don't want to exacerbate a problem that we have in this country already with business investment. We want the economy to be stronger, more inclusive and more sustainable than it was before COVID-19. I know the member for Cooper shares those objectives and speaks and acts on those objectives frequently. We want a big part of this story to be about kickstarting and broadening investment in this country, so we can get those secure and well-paid jobs that people are crying out for into our economy. We want small business to thrive and not just survive. We want more businesses to start up and scale up. We want more investment in research and innovation and in commercialisation to turn those ideas into jobs. We want to help business take a longer-term view that supports jobs and investment and helps create a dynamic future economy. We want less focus on spraying around profits on things like executive bonuses. We want super funds to play a bigger role in the recovery, rather than being attacked and undermined at every turn by this government. And we want foreign investment that supports and complements these goals, that allows us to better adopt and diffuse new technologies, strengthen and broaden our trade and create well-paying jobs in cities, suburbs and regions.

That's why we're prepared to be constructive when it comes to these bills. We genuinely want to make sure that our colleagues and counterparts on the other side of the House do get the balance right between welcoming that foreign investment and ensuring that it's in the national interest and good for jobs. But being constructive doesn't mean being silent. It means pointing out the facts about the failures of the past and doing what we can to ensure that the government does a better job in terms of foreign investment, business investment more broadly, and managing an economy so that it can be better after COVID than it was before.

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