House debates

Thursday, 3 December 2020

Bills

Foreign Investment Reform (Protecting Australia's National Security) Bill 2020, Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020; Second Reading

12:33 pm

Photo of David GillespieDavid Gillespie (Lyne, National Party) Share this | Hansard source

The Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 are two of the more important bills that pass our analysis, and I rise in support of them. Australia, since it was first settled, has relied on foreign capital. As a young nation, in modern economic terms, we don't have deep repositories of capital. Everyone knows that wealth creation, wealth, capital and skilled labour, comes out of raw material, and Australia has that in vast quantities—namely, we have lots of arable land, we have water in some areas that is available and we have some great businesses that are doing all of that. But, historically, we've always relied on foreign investment to get that foreign capital into developing our assets. The same goes for our mineral assets and our agricultural assets. What I want is a system that guarantees that wealth creation is still within reach for Australian individuals and Australian controlled entities who pay taxes in Australia. What I don't want is for that dream to be out of reach for people who have a desire to get ahead and develop those assets that we as Australians should be controlling.

You've seen around the world, with quantitative easing round 1, round 2 and subsequently, that there is an amazing amount of cheap money floating around the world that is flooding into investment locations because people need to get a return on it, and when it's so cheap you get asset inflation. That sounds great initially, but, if it means buying real estate—whether it's residential or farming land—or getting into business and taking over businesses and it's beyond the reach of average Australian individuals and businesses, then it's defeating the purpose for which we welcome the investment. I'm not saying we shouldn't have foreign investment. I'm saying we need foreign investment, but there's an issue, in that foreign investment, historically, has been in private capital by private individuals and private businesses, but there is a phenomenon whereby some investments are by state owned entities, which have other responsibilities apart from their fiduciary duties; they have a responsibility to the state that owns them—and that's where I have some misgivings. Ownership of land is very much a totemic, touchstone issue around the community. People see foreign investment coming into local regions and some have a reflex of not liking it. A lot of the things that the previous speaker, the member for Clark, mentioned about increasing charges and increasing the regulation of residential land have actually been addressed in previous parliaments.

But this discussion also has to include the foreign ownership of water entitlements. We already have a register that the Australian Taxation Office has been running since 2015, and it's very informative to go through the actual figures: 10½ per cent of the water entitlements, a total of just over 4,035 gigalitres, around Australia is in foreign hands. You can't take the water overseas, but, when you have a lot of cheap foreign capital coming in and buying the water rights, because they're a tradeable commodity it can make the water very expensive. If Australian owned businesses do not have access to similarly cheap capital, with virtually zero or negative interest rates, that can cause inflation of that tradeable asset. A lot of this investment is in the Murray-Darling Basin, mainly in the northern section, and the biggest investors are America and China. They have 1.9 per cent each. In a similarly run register, as of 30 June 2019, 52.1 million acres, or 13 per cent, of our arable agricultural land is foreign owned. That is actually a 0.9 per cent reduction.

Also, the previous speaker was talking about leasehold rather than freehold. It's interesting to note that 83 per cent of foreign ownership of agricultural land is leasehold ownership, not freehold; and 85 per cent of agricultural land ownership is pastoral or for livestock production. Again, the top two investors are countries you wouldn't think of, and they are the United Kingdom and China. We also have to register any shareholding that has at least 20 per cent foreign ownership in it, so a lot of those figures reflect water and land that are also owned in part by Australian businesses and individuals. In freehold ownership, the top owner is the Netherlands, followed by the USA and the UK. China is a distant fourth, and then there are many other countries, like Canada, Malaysia and Thailand. Many overseas businesses have invested for over a century in Australia.

But, as I said, my concern is not with investment; it's with who is getting the benefit. We want the benefit of the investment to run to Australian companies and the Australian taxpayer, and for the wealth that is generated out of land and water to be circulating in Australia rather than circulating overseas. That is a bit of a dilemma. I'm sure you're all familiar with transfer pricing and the movement of funds out of turnover into fees and charges that parent companies overseas charge Australian businesses. I'd much prefer a lot of Australian companies having this size of investment in Australia, because they are going to pay the tax and keep that money circulating in Australia rather than overseas. But, if a business wants to invest in Australia, register here and pay taxes here, I say open the door. We need capital to grow our economy.

Like many speakers on the other side here, I'm very frustrated at why our Australian super funds are reluctant to invest in Australian land and water and, in many cases, businesses. They're looking overseas, because maybe some of the returns are better over there. But the main reason—and it has been the subject of inquiries by standing committees in this parliament—is that the reporting requirements for Australian super funds have a very narrow time frame. In fact, they sometimes have to report three or four times a year, whereas a lot of these sovereign wealth funds from other nations have 10-year reporting time frames, particularly for agricultural land, so they have much more patient capital.

We could get more investment by our industry and other super funds in Australia if those regulations and responsibilities could be modified so that there is a different investment mandate for them that won't breach their requirements here in Australia—similar to, as I mentioned, the Netherlands and some Canadian entities, like pension funds, which have huge investments here. They have much longer reporting time frames. As anyone who has an investment in agricultural land has realised, you have to hold property for a very long time to cope with the weather cycles and the commodity cycles. You have good years; you have bad years. But a lot of Australian investors see their super fund unit price going up and down. The boards get very worried that they'll be seen to be doing something against the best financial outcome for their members, so they think, 'Okay, we'll go overseas for better returns, and people will see their benefits going up pretty much immediately.' But that's not what we're talking about today. We're talking about these bills.

The COVID phenomenon has changed Australia's outlook towards its own supply chain in everything, from manufactured goods to our critical bits of real estate, ports, airports, trade ways—like railways—and all the other utilities that make up the architecture of a productive industrial economy. These foreign investment reforms are addressing the concerns that have come to light because of a changing geopolitical landscape and the lightbulb moment for many Australians across the nation, including state and federal governments: the realisation that there are some things we have to have sovereign capability in.

So the proposed reforms are really quite sensible. Having a national interest test for sensitive businesses or sensitive bits of real estate, with the ability for the Treasurer to call in owners of the foreign investment for review to check they're complying with the conditions of the investment, is a really sound principle. I actually thought this was already in place, but it appears it was not. So this reform is very welcome. Stronger enforcement powers, increased penalties of a civil and pecuniary nature, infringement notices and giving the Treasurer or his delegates increasing directions powers and increasing monitoring and investigative powers are all pretty sensible initiatives. Better information sharing and merging or amalgamating the existing registers that I was referring to—the ag land register and the water register—as well as adding residential land and businesses to that, will give governments much better oversight of these investments.

Australians, including me, welcome investment by foreign entities in Australia, but we expect them to be true to their word, develop the business, develop the land, use the water, pay their taxes in Australia and not use complicated accounting techniques to transfer the wealth that that business or other entity is generating in the nation to a lower tax threshold overseas. That's another bit of legislation that we put through this House to try to limit that. This ownership register, where it's all there for people to see and for the Treasurer or his delegates to review, is a really sound bit of governance. I commend this bill to the House.

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