Thursday, 3 December 2020
Foreign Investment Reform (Protecting Australia's National Security) Bill 2020, Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020; Second Reading
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.
That all words after "That" be omitted with a view to substituting the following words:
"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 thank the member. The original question was that this bill be now read a second time. To this the honourable member for Rankin has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. If it suits the House, I will take the question in the form that the words proposed to be omitted stand part of the question.
The Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020 represent the most significant reforms to the Foreign Acquisitions and Takeovers Act 1975 since that legislation was introduced. These bills will ensure that our foreign investment framework remains fit for purpose and keeps pace with emerging risks. The changes mirror similar changes underway in comparable countries around the world.
I'm a supporter of foreign investment. Since settlement, Australia has always been a net capital importer. It's foreign investment that has allowed us, with a small population base, to develop the resources of this vast continent, to build First World infrastructure and to create the modern and prosperous economy and society from which we all benefit today. A small domestic population, which Australia has, could never alone deliver us the savings needed to fund our development. It's foreign investment—access to foreign capital—that has allowed us to do this. It has allowed to us fully harness the talents and ingenuity of our own people.
Foreign investment drives economic growth, it supports the creation of skilled jobs, it improves productivity and it gives us access to important overseas markets. Australian firms with foreign direct investment support one in 10 jobs in Australia. They also make a significant contribution to the one in five jobs in Australia that are export related. Businesses supported by foreign investment contribute more than a quarter of industry, value added, and foreign businesses pay wages that are, on average, $20,000 per year higher than those paid by non-foreign businesses in Australia. It's important that we remember these facts, particularly as protectionist pressures rise around the world and particularly as we go about updating our foreign investment framework.
As I said, Australia has always welcomed foreign investment, and we've been a beneficiary of foreign investment. If we turn our back on foreign investment, ultimately, we as a nation will be the poorer for it. That said, there are good reasons to update our foreign investment framework to deal with new and emerging national security risks, including as a result of rapid technological change and changes in the geopolitical and security environment. There are good reasons to update our framework to strengthen compliance measures and to streamline approval processes, but in doing so we must take care to preserve the underlying principles of our system: that Australia is a country which welcomes foreign investment, that Australia runs a non-discriminatory foreign investment regime and that, where we put processes in place, there is a good public policy justification for doing so and that the measures we put in place are proportionate. It's also important that the public retains confidence in the integrity of our system. These bills, I believe, get this balance right.
Earlier reforms to the foreign investment review framework were made in 2015. At that time the Foreign Acquisitions and Takeovers Act was modernised by bringing all foreign investment into the legislative framework, by strengthening the Treasurer's oversight and enforcement in the residential real estate sector, by providing greater scrutiny and transparency around agricultural investments, and by introducing fees so that the cost of administering the foreign investment regime was borne by foreign investors and not by Australian taxpayers.
Under the current foreign investment regime in Australia, foreign persons must notify the Treasurer of certain actions where the investment meets certain criteria, such as monetary or percentage thresholds that are dependent on the sector, the nature of the investment and the country of the investor. During the coronavirus crisis, this year, the government announced on 29 March a temporary reduction to zero dollars of the monetary screening thresholds for all foreign investments subject to the Foreign Acquisitions and Takeovers Act. Prior to these changes, foreign government investors faced a zero dollar screening threshold, but private investments under $275 million—or under $1.192 billion for investors from FTA partner countries—were not screened. The presence of these thresholds means that certain investments in some of the most sensitive sectors are not liable to screening, which can create a vulnerability for Australia. These bills we'll be debating today address this vulnerability and seek to build upon earlier reforms. The bills will expand scrutiny of investments which pose potential national security risks.
There will be a new national security test for foreign investors seeking an interest in a sensitive national security business, including where they seek to start such a business. Such investors will be required to seek approval before starting down this pathway regardless of the value of the investment. This will include when a foreign person seeks to acquire a national security business from the Commonwealth or from a state, territory or local government. These actions will not be exempt from the operation for legislation. Generally speaking, national security businesses will be connected with such things as critical infrastructure, defence, the national intelligence community and related supply chains. It will include businesses that develop, manufacture or supply critical goods, technology or services that will be used by defence and intelligence personnel in Australia or in other countries, as well as businesses that own, store, collect or maintain classified or personal data relating to Australia's defence and intelligence services and personnel.
This mandatory notification will also be required for proposed investments in national security land where location or use of the land could prejudice Australia's national security, including interests in exploration tenements in national security land. National security land will, amongst other things, include defence premises or where a national intelligence agency has an interest in the land. The definitions of 'national security business' and 'national security land' will be prescribed in the foreign acquisitions and takeover regulations, and the government intends to provide guidance material on these definitions to support investors in navigating these reforms. The member for Rankin was correct to point out that investors will need such guidance.
Schedule 1 to the bill also defines a new category of actions: notifiable national security actions, as they're called, to describe actions that must be notified to the Treasurer for review regardless of the value of the investment or where they are otherwise notifiable. And there will also be provision for investments not otherwise notified to be called in for review by the Treasurer if they raise national security concerns. Investors will also be able to voluntarily notify of actions that could be called in to obtain certainty about their particular investment should they wish.
There will also be a last resort power, giving the Treasurer a final opportunity to review actions for which approvals have been given if exceptional circumstances arise. This last resort power can only be used if a national security risk arises in relation to the investment and other options to address this risk have been exhausted. The last resort power also allows the Treasurer to impose conditions, to vary conditions or, in extremis, to issue a disposal order and force divestment where there are no other remedies for the identified national security risk.
The existing national interest test in the legislation remains unchanged, including the factors that are relevant for such assessment, such as the character of the investor; the level of competition in the market; the impact on the economy, the community and national security; and other relevant government policies. All these remain unchanged. These new bills will, however, provide for stronger enforcement powers through increased penalties, direction powers and new monitoring and investigative powers in line with those available to other regulatory agencies. This will include such things as access to premises by consent or as permitted by warrant to gather information. And these measures and these powers will improve regulators' abilities to monitor investor compliance and investigate potential noncompliance.
The Treasurer will also have new powers to give directions to investors to prevent or address suspected breaches of conditions. Furthermore, increased civil and criminal penalties provided for in the bills will ensure better deterrence. Taken altogether, the measures will mean breaches relating to foreign investment can be adequately investigated and meaningfully punished, and they will ensure the size of the penalties provide an effective deterrent against noncompliance.
The bills also provide for a new register of foreign owned assets, which will include the existing registers and will record foreign interests acquired in land and water rights and be expanded to include any acquisitions that now require foreign investment approval. The new register will provide a more comprehensive picture of foreign investment in Australia and ensure that public confidence in our system of foreign investment is maintained. The intent is that the temporary measures announced on 29 March of this year, where we introduced a zero-dollar threshold for review, will transition to this new system once legislated with a view to the new system taking effect from 1 January 2021.
I do not believe that these bills should have a material impact on the level of foreign investment in Australia. I believe that our attractiveness as a foreign investment destination will remain. In the three years to 2019 our FDI inflows averaged 3.3 per cent of our GDP, compared to 1.7 per cent average for other OECD countries. We have an abundance of high-quality investment opportunities in Australia that cannot be met from domestic savings alone. We have a stable democracy. We have a strong rule of law. We have a highly skilled and a highly educated workforce, and we have a strong infrastructure base. We are proximate to the most economically dynamic region in the world and we have a well-managed economy. All these things mean that Australia will remain a very attractive destination for foreign investors.
There has been widespread stakeholder consultation concerning this legislation. Exposure draft legislation was released on 31 July. Treasury has undertaken over 40 engagements with over 1,000 stakeholders. Treasury has received 54 submissions, and I note that similar jurisdictions around the world are taking steps to modernise and strengthen their foreign investment regimes.
On 11 November the UK government introduced legislation, the National Security and Investment Bill, which increases government security and transparency within 17 sectors of their economy, focused on areas such as technology, data and infrastructure, with the UK government, under this legislation, having the power to unwind any transaction within the last five years if it deems that transaction to be a risk to national security.
The United States passed its own Foreign Investment Risk Review Modernization Act in 2018. France and Germany have introduced similar laws. Canada, Japan, the EU and New Zealand have all also recently updated their foreign investment rules. In fact a 2019 paper by the OECD found that, in the two years from 2017 to 2019, nine out of the world's 10 largest economies had modified or introduced new policies to manage foreign investment related risks. So Australia is in good company here.
Undoubtedly, these new bills do create additional regulation, but I believe that this additional regulation is proportionate and reasonable in comparison to the risks being addressed and they get the balance right. In particular, they address existing shortcomings in our foreign investment review regime, most notably here the so-called screening gap whereby low-value investments from private foreign investors can proceed into Australia without any government oversight even where they may pose significant national security risks. These bills, however, also increase the monitoring, compliance and enforcement tools available to government, ensuring that there is an effective deterrent against noncompliance.
Finally, they will increase public confidence in and transparency around foreign investment, including through the establishment of the new register of foreign ownership. Although there is some additional regulation, fundamentally, I do not believe it will deter foreign investment in Australia and, in many instances, it will in fact provide foreign investors with greater certainty. I commend these bills to the House.
Australia benefits from investment, but we haven't had enough of it in recent years. In preparing my remarks today, I turned to the Australian Bureau of Statistics figures on actual business expenditure. It showed that, if you looked at 2013, the year that the government came to office, you would see business investment was around $160 billion. By 2019 it had fallen to around $120 billion, and this year looks to be somewhere around $100 billion. So, Australia has an investment problem, and foreign investment can be an important part of rectifying that.
Foreign investment, as the shadow Treasurer has noted, has played an important role in Australia's history and Labor has been supportive in a broad sense of the role that foreign investment has played. You need only look at the Japanese investment in our beef industry; investment by American firms such as Kraft, Kodak and Heinz; investment by Schweppes; investment by General Motors and Ford, before the car industry was goaded to leave the country by the coalition; investment in our oil and gas sectors, including by Royal Dutch Shell, Chevron and ConocoPhillips; and foreign investment in the movie industry. Among the movies made in Australia are The Matrix, Mission Impossible 2, TheGreat Gatsby, Babeand Wolverine. Australia has imported not only foreign capital but also the know-how, the additional productivity and the competitive benefits that can come from foreign investment.
Foreign investment isn't without its dangers. Large multinationals have increasingly looked in recent years to channel profits through tax havens, with one study suggesting that two-fifths of multinational profits are now channelled through tax havens. We need tougher laws to make sure that tax havens aren't misused and, in an era in which firms are increasingly engaged in weightless production, that the opportunities provided by intellectual property to move the legal location of profits to low-tax jurisdictions isn't exploited in a race to the bottom on company tax. We need to ensure too that foreign firms are operating on a level playing field and that they're not simply snapping up local firms that could otherwise provide a competitive benefit to the economy.
We know Australia has a market concentration problem. New research published just last month by Sasan Bakhtiari showed that market concentration in Australia has gotten worse over the course of the last decade. So we need to be careful as we move into foreign investment that it's boosting the competitive landscape and we're not ending up in a situation where we have just a few big firms dominating.
The Productivity Commission this year brought out a paper on foreign investment in Australia. It noted that Australia has the fifth most restrictive foreign investment screening of the 36 OECD countries, so we are relatively restrictive when it comes to our approvals regime. Most of this is indeed due to the screening and approval regime, for which Australia has the second most restrictive scheme in the OECD. Only New Zealand has a more restrictive foreign investment screening regime than Australia, and the Productivity Commission pointed to research that suggests that New Zealand's more restrictive approach to foreign investment has indeed led to lower investment levels in that country and is potentially one of the reasons New Zealand's labour productivity has been relatively sluggish.
The report notes that were we to decrease foreign investment flows by a quarter, the wages of Australians would fall by about two per cent. It goes on to model a scenario in which Australia's foreign investment rules were moved to a level of restrictiveness equivalent to New Zealand. It estimates the cost of that would be $82 to $731 per Australian household per year, and it notes that there would be a 0.26 per cent fall in gross domestic product and a 0.24 per cent fall in wages. The Productivity Commission points out that the model it is using assumes that unemployment stays constant, but it points out that in fact it is probably more realistic to think of the impact of more constrained foreign investment as being both on wages and on unemployment, meaning that were Australia to savagely restrict foreign investment we would see even worse wage growth than we've had in these recent times. That's hard to imagine, given that wage growth has fallen to historic lows under this government and was already trending down badly before COVID-19 hit, but wage growth would be worse according to the Productivity Commission with a more restrictive foreign investment screen and unemployment would be higher.
It is worth noting that in the October budget the government announced measures aimed at increasing investment in Australia, with immediate expensing measures designed to encourage firms to increase their capital investment. If this bill has the effect of reducing investment, it would have an economic impact the exact opposite of that, and that means that Australia could face a slower recovery.
The government assures us that there is not going to be an impact on overall investment of this bill, but they've presented no careful modelling that would support that. The modelling we have is the modelling from the Productivity Commission, and that certainly leaves Labor cause for pause. That's why the shadow Treasurer has foreshadowed that Labor will move a substantive amendment in the Senate requiring Treasury to review the impact and effectiveness of the bill within the first 12 months of its commencement. I urge the Treasury to work with the boffins of the Productivity Commission, whose analysis has suggested that there could indeed be a significant impact on investment from tighter foreign investment screening, which would then mean a slower recovery for Australia.
It's certainly the case that we need to take national security concerns into account, but this can be done in a way that doesn't waste the time of foreign investors. The way in which screening was carried out for the Port of Darwin lease was ham-fisted, putting it politely. Coming only four years after the United States, our largest security ally, had agreed to rotate marines through Darwin, we failed to consult with the United States over the lease of the Port of Darwin. The investment in New South Wales energy grids is of much the same character. Australia failed to lay out the clear principles that would guide foreign investment in electricity grids. It's certainly appropriate that there be scrutiny, especially in areas such as telecommunications and electricity. Other countries have these approaches as well. But if the approaches are cack-handed and capricious then they simply deter foreign investors and ensure that Australia gets less foreign investment than we would have otherwise.
There is significant uncertainty in this bill over the definition of a national security business, particularly given its connection to the Security of Critical Infrastructure Act 2018, which is currently under review. Industry and investor groups, particularly in the resource sector, have raised the concern that these proposed changes could create sovereign risk, might deter investment, might delay application processing and might make an already complex system even harder to operate. It's important that we carry out screening in a way that doesn't waste the time of potential investors—that foreign investment screening is done swiftly and carefully. The Foreign Investment Review Board has been under-resourced and too opaque. It's been operating in a way better suited to last century. It hasn't provided the sort of clarity of guidelines to investors that you'd expect of a country which is putting in place foreign investment screening that's among the most restrictive in the OECD.
In concluding, I would highlight why it is important for me, as a Labor member, to see Australia receiving foreign investment, and that's because of the way in which foreign investment and immigration both affect the capital-labour ratio. You can think of a large-scale program of immigration as increasing the number of workers relative to the capital stock. We know in very broad terms that, if you have countries that have a lot of workers and relatively little capital, wages tend to be lower. Conversely, if you have countries that have a lot of capital and relatively few workers, wages tend to be higher. The starkest example of this is the end of the 19th century, when workers moved from labour-rich Europe to labour-scarce Australia and saw themselves earning more than anyone else in the world. One of the reasons why Australia was the so-called 'working man's paradise' in the 1800s was the fact that labour was relatively scarce.
Foreign investment does the opposite. Foreign investment means that we take in greater capital, and that means there is more capital per worker and we're able, therefore, to see wages rise. So, as a Labor representative who believes in engaged egalitarianism, who believes in the benefits of multicultural Australia and who's immensely proud of the way in which Australia has been enriched over the course of the postwar era by large-scale migration, I see foreign investment as sitting alongside that. If we say yes to large-scale migration and no to foreign investment, then we shouldn't be surprised if, over the long term, that has some downward pressure on wages. But if we say we're going to take foreign investment, appropriately screened, and we're going to be open to migrants, again, through our points based system which underpins skilled migration, then we're able to be a country that is open to the world and continues to pay high wages.
So our openness to foreign investment isn't contrary to Labor values. Indeed, it's from my Labor values that I believe that foreign investment does play a vital role in Australia. It's why I always find it strange when those on the Left say we should take more workers but no foreign capital and somehow assume that that's not going to have an effect of pushing down wages. I'd encourage my friends on the Left to be as open to foreign capital, properly screened, as they are to overseas workers and to recognise that those two things go together. They allow us to keep the capital-to-labour ratio where it is and to ensure that there is plenty of machinery and technology to sustain the productivity growth that supports strong wage growth. So it's as an egalitarian that I support foreign investment.
This bill before the House is one which requires careful scrutiny. We're in a challenging international environment—there's no doubt about that—but foreign investors don't come from just one country. We need a broad-principles approach, not the hodgepodge of screening thresholds that we have right now. Australia needs to approach our foreign policy by working with allies, by hewing to an international rules based order and by understanding that our greatest periods of prosperity, as the University of Sydney's Stephen Kirchner has pointed out, have been our periods of greatest openness. The late 19th century was a great period of prosperity for Australia precisely because of our openness, and the surge in living standards that occurred during the 1980s and 1990s is a marker of our return to openness. When Australia has closed itself off from the world we have suffered not just culturally but economically. We're at our best when we're engaged egalitarians. It's that philosophy that I'll bring to every debate in this House.
Our government has a proud track record of protecting our nation and our national interest of keeping Australians safe and secure. This package of bills before the House will build on that record, further strengthening our foreign investment framework and giving Australians confidence that their government has the power to ensure that foreign investment is in line with our national interest. Indeed, this package deals with one of the key policy issues I put my hand up for to represent my community in the federal parliament.
I have been a longstanding advocate for governments of all persuasions to legislate in this area in order to protect our national interest. Before my parliamentary life I was a newspaper columnist for The Advertiser in South Australia and before that for TheAge newspaper in Melbourne, and I wrote a number of columns raising the need for reform in this very area. I also noted my concerns about foreign government investment in Australia in my maiden speech to this place. I know I'm not just speaking on my behalf when I raise these concerns and these issues. Safeguarding our national interest is not just a key policy priority for me; it is also a key concern to many tens of thousands of people in my local electorate of Boothby and many millions more people across Australia. These Australians, like me, know that the broad issues of foreign investment and foreign interference reach across so many parts of Australian life. Without the proper protections, oversight and enforcement options in place, these matters, left unchecked, may affect our national security, our food and water security, our critical infrastructure, our democracy, our educational institutions and, in a time of crisis, which we hope we never see, our very way of life as Australians.
The things that we seek to protect by being discerning and thorough when looking at foreign investment are the very characteristics that make our nation such an attractive investment prospect. We have a stable democracy underpinned by the rule of law, a highly skilled and educated workforce and a wealth of natural resources, combined with the ingenuity of the Australian people. All of these factors have given us one of the highest qualities of life in the world. This is what could be at risk if lawmakers, such as us, do not put the right policies and protections in place.
I'm pleased that this package of bills will add to our excellent record in this area. In amending the Foreign Acquisitions and Takeovers Act 1975 the key measures include: a new national security test requiring mandatory notification for investments in a sensitive national security business or land and allowing investments not otherwise notified to be called in for review if they raise any national security concerns; a new last-resort power, giving the Treasurer a further opportunity to review actions for which approvals have been given if exceptional circumstances arise and to impose conditions or issue a disposal order where there are no other remedies for the identified national security risk; stronger compliance and enforcement powers through increased penalties, directions powers and new monitoring and investigative powers in line with those of other regulators; integrity amendments that close potential gaps in the screening regime; and, finally, a new register of foreign owned assets, amalgamating the existing registers that record foreign interests acquired in Australian land, water entitlements and contractual water rights and expanding them to include business acquisitions that require foreign investment approval.
The other part of this package will uphold the policy position of the federal government that the cost of administering our extensive foreign investment review framework should be borne by foreign investors and not Australian taxpayers. By amending the imposition of fees associated with foreign acquisitions and takeovers we are doing just that.
The broad-ranging powers I have highlighted will heighten our government's scrutiny of proposed investments, ensuring that any investment that presents a risk to our national security is captured by this framework. It empowers our departments, agencies and government by giving more oversight and extending powers of enforcement to show that we mean business.
By amalgamating the registers of foreign owned assets we can see how these reforms will work in tandem with our already long list of policy achievements in this area. Indeed, it was our government in 2015 that at long last established the well-overdue registers that cover foreign ownership of agricultural land and foreign ownership of water entitlements. I have written in my former life as a newspaper columnist and have spoken in this place about foreign ownership of agricultural land and its register. I wrote those columns before I ever imagined I would end up in this place. In particular I posed the question: how much investment from foreign nations should we be allowing in our own country, especially in relation to our farming land and our critical infrastructure?
In this place I've also questioned why any business that used to be government owned and has been privatised by a government of either party in this place should then be purchased by a foreign government or a foreign state owned wealth fund. In essence, if we're privatising a business, why would we then allow a foreign government to purchase that business, given that we have a policy of trying to keep government out of business and letting businesses just get on with business? Tracking and mapping any such activity and now being able to prevent it altogether, thanks to our zero-dollar threshold, means that we can better protect Australian assets and businesses and know exactly who is purchasing them or seeking to purchase them.
In addition to establishing an overarching and general register of foreign ownership of Australian assets this legislation will create extra obligations for notification on the register across a much broader range of interests. This much fuller picture of foreign ownership will ensure scrutiny and a clearer assessment of investments that may be contrary to our national interests. It will allow the government to better connect the dots and to accurately quantify the economic power any one nation is able to project into Australia whether directly or through state owned corporations. It is it is complementary to a bill recently passed by this House and currently before the Senate, Australia’s Foreign Relations (State and Territory Arrangements) Bill 2020. That bill seeks to establish a legislative scheme for the Commonwealth to assess arrangements between state, territory or local governments or Australian universities and a foreign government or related entities. In doing so, the government will consider whether such arrangements are consistent with our nation's foreign policy and, by extension, would ensure these deals and formal relationships are within our national interest. It goes so far as to possibly invalidate an arrangement if, once assessed, it is inconsistent with our own policy.
Certainly, Australian governments do very well in independently building and maintaining important international relationships, but our nation must take a coordinated and consistent approach to foreign policy. We must be united in our goals as a prominent and proactive middle power on the international stage. Just as we expect private sector investments in Australia to be in line with our national security, we rightly expect the same from other Australian governments and our university sector. We are taking a truly national and whole-of-government approach to an issue which affects us all. This comprehensive approach is evidenced by other rigorous reforms in areas such as critical infrastructure, combatting espionage and interference, establishing the Foreign Influence Transparency Scheme and reforming our electoral laws and donations.
The tentacles of foreign interference risk have tried to extend far into many parts of Australia, sometimes cloaked under the guise of investment, and we are fighting back on every front. In protecting our nation's critical infrastructure such as ports and utilities, including water, gas and electricity, we passed the Security of Critical Infrastructure Act 2018. We also established the Critical Infrastructure Centre, which provides government with a coordinated and comprehensive assessment of national security risks to these assets. As a result of this, we now have reliable and up-to-date information on who owns and operates our infrastructure here in Australia and an understanding of any potential risks. Combined with the new authorities given under this bill—in particular, the ability to impose conditions or order divestment of an asset—these now create powerful protections for our infrastructure and the Australian industries and people they serve.
While infrastructure and its ownership may be easier to track and trace, not all possible risks to our national security are so easy to track down. Around the same time as this legislation passed, the federal government concurrently tackled the seamy underbelly of foreign influence, espionage and political interference. With a tranche of legislation passed in 2018, our government comprehensively overhauled laws relating to foreign influence, espionage and foreign political actors in Australia. This legislation was the biggest reform to Australia's counterintelligence framework since the 1970s and the Cold War. I consider this one of the largely unsung achievements of the federal Liberal government and of the 45th Parliament.
The passing of the National Security Legislation Amendment (Espionage and Foreign Interference) Act 2018 modernised and strengthened our laws pertaining to espionage and foreign influence and interference. It added new provisions for secrecy, sabotage and treason, fixing what were previously unwieldly laws that did not see a conviction under their offences in decades. This empowered our counterintelligence agencies to fulfil their brief in a modern world with various growing and emerging risks. This act also criminalised the use of force, violence or intimidation to interfere with Australian democratic or political rights, sending a clear signal to any authoritarian countries that we will not allow the tactics they employ within their borders to be exported to our nation. That is why the act also introduced a new offence for the theft of trade secrets on behalf of a foreign government, because we know theft foreign interference may target individuals, institutions and infrastructure but, as we have learnt in recent years, it can also target industry. We do know that the stealing of intellectual property is a big issue for industry, particularly as we compete to innovate and be at the cutting edge. This measure is helping to protect Australian companies and, in turn, their employees' livelihoods.
To shed light on the nature of the official projection of foreign influence in Australia we established the Foreign Influence Transparency Scheme, which requires persons who are undertaking certain activities on behalf of a foreign government, a public enterprise, a political organisation or a business to register. Many if not most people in Australia who fall into these categories have legitimate purposes and noble aims, and, indeed, they may be allies to our nation. So registration as part of the scheme should not be viewed as a crime. However, a failure to disclose ties to a foreign principal actor is.
I have described our government's comprehensive approach to managing the national security risk posed by foreign investment as it is relevant to the bills before us and foreign interference as addressed by policies previously passed by this House and the other place. In doing so it is clear that these national security risks permeate throughout our society, from universities to industry, to food and water security, to infrastructure and to our farming land. Just as it touches those parts of Australian life, so too it has tried to extend itself to this parliament and others. We in this parliament are not immune to the effects of foreign interference or influence, nor should we believe that we are above scrutiny or accountability in this regard. That is why the last interlocking legislative reform I will touch on in highlighting our work in this area and speaking in support of this national security legislation is that of the electoral funding and disclosure reform we implemented before the last election.
Those who were serving as parliamentarians during the last term, and, indeed, many around Australia, would remember the immense controversy surrounding the cash donations received by a then Labor senator. That episode sparked reforms that, in reality, should have happened much earlier, because why would foreign actors bother with espionage, sabotage, intimidation or extensive efforts to project their power into the nation when they could simply and easily go straight to the top, to our lawmakers? Thanks to the reforms of our government, they cannot do so. We banned donations from foreign political entities and broadened the definition of 'political parties' to include more organisations. We reformed a new category of political campaigner, based on political expenditure, and imposed similarly strict reporting obligations that proper political parties rightly hold. These measures were underpinned by new criminal and civil penalties if these new laws were breached.
By doing this, we have helped to restore the confidence of Australians in their government and in a long, uninterrupted, stable democracy. We've restored their faith in us by holding ourselves to the standards that are quite honestly expected and by enshrining those standards in law. That is why I am proud to speak on yet another measure that will keep Australians safe and protect our national security. I commend the bills to the House.
I move an amendment:
That all words after "whilst" be omitted with a view to substituting the following words:
"not declining to give the bill a second reading, the House calls on the Government to immediately stop all foreign takeovers of agricultural lands and place a ban on the acquisition of assets of strategic economic importance or strategic defensive importance to Australia".
I consider these bills, the Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020, good bills. In this country 235 years ago, Australians heard about some people—'whitefellas', we called them—coming here. They gave us beads and trinkets and blankets, and we thought they were a pretty good outfit and it was pretty good to let them in. But the outcome for we First Australians was not very good—not very good indeed—and I think we all know that and admit that. The life expectancy in parts of Cape York is 40 per cent lower than in the rest of Australia. In the Torres Strait it is 20 years fewer than other Australians, just to quote but one figure—and we won't go into the ugliness of what took place, but it wasn't a real good idea. As a gentleman in England, called Mr Winston Churchill, said: 'If you do not learn from history, then you are doomed to have that history reimposed upon you.' It might be nice if some people in this place listened to that gentleman.
At the time of talking, 40 per cent of Australia's electricity industry is owned by China. What country on earth would allow that for 40 per cent of its most essential service? Without electric pumps you can't get a drop of water to drink unless you're going to take a bucket down to the river, and too bad for those of us who don't have a river with water in it, I suppose! What sort of a country would allow that to happen? It's worse than that because if I add in the 15 per cent of Australia's electricity that comes from solar panels—well, the solar panels come from China. So you can take out another 20 per cent and add it to that 40 per cent. We now have 60 per cent. Then if you take out Queensland—because Queensland is still owned by a corporation which the government still owns at this stage, albeit tenuously—China owns 70 per cent of our electricity supply. What sort of a country are we? Are we Australians in this place?
History will not record that Australians were in this parliament when the country was sold out. As far as agricultural lands go, the biggest agricultural operation in Australia is Van Diemen's dairies—owned by China. The second biggest is Cubbie Station—owned by China. The third biggest is the AACo—owned by foreigners. The fourth biggest is Consolidated—owned by China, or Chinese intermediaries. The fifth biggest is Kidman. I'll leave it to somebody else to argue who owns Kidman's. I could go on, but those are the biggest farming operations in this country. Bigger than all of them put together will be the Ord stage 2 and 3. A minister in the Liberal government handed over stage 2 and stage 3. I use the words 'handed over' because 31 Australians applied for that water and they were all knocked back. It was given to China.
The only development project in the north-western third of the land area of this country—right in the heart of it—was given to China. The only deepwater port in the northern half of this country is Darwin—and it was sold. If ever there were a Judas Iscariot act—a minister in the LNP government sold the port of Darwin to China. It's the only deepwater port in northern Australia. Whilst the media are out there screaming about all these ports in the South Pacific being taken up by China, this government gave that port to China. It demonstrates the underlying corruption that's at the University of Queensland and in this place. That gentleman walked out of this place being paid $900,000 a year plus his ministerial superannuation salary of $300,000 a year. He walked out with close to $1.2 million. Let me say that the 30 pieces of silver has inflated! Since the time of Judas Iscariot, there's been an inflationary pressure. A cabinet minister in this place is the modern-day equivalent.
Let me return for a moment to ownership of our essential services. Obviously water and sewerage are the two most essential services. All of our water pumps and sewerage pumps are made in China. They break down regularly and continuously. You can't just go and buy a giant water pump the size of a person's bathroom—maybe four times the size. You can't buy them off the shelf. They have to be poured, foundered, in a foundry in China. If something breaks down, then you're at the mercy of China. I'm just wondering what aspect of Australian life is not at the mercy of China.
To underline the set of values that are exemplified by this place, the First Australians owned most of Cape York Peninsula and a fair proportion of the top of Western Australia. When we say 'own', well, they own it, except to quote the Western Australia state member representing northern Western Australia: 'Yes, we own it, except we're not allowed to break a twig on it. We're not allowed to take a rock off it. We're not allowed to take a glass of water out of the billabongs. Apart from that, we own it.' Well, of course, what she's saying is absolutely correct.
The collective laws of Australia make it impossible for them to ever use that land, and, in any event, they can't get a title deed to it. They have some sort of Mickey Mouse arrangement called tribal lands, and the governments of Australia—state, mainly, and federal—have this wonderful handover ceremony where they hand over a million acres to some tribal grouping. When they find out it's worth something, that tribal grouping will be dumped because someone stacks the next meeting. But, quite apart from that primitive mechanism, Europe gave up tribal ownership 2,500 years ago; the Asians gave it up 3,000 years ago. Yet we impose that upon First Australians. We give them a draught horse and ask them to compete on the world market in agriculture using a draught horse instead of a modern-day tractor.
Every single country in the world provides title deeds. There is a wonderful book out. There's great controversy, because the author didn't get a Nobel Prize and he should have got one—that's Hernando de Soto, an economist with the World Bank. He said the reason that Peru, the Philippines and Egypt are the poorest countries on earth is that they can't get a title deed. It takes on average seven years with around 270 legal processes to go through to get a title deed. Even if our poor First Australians had that, there is still no ultimate title deed. If you manage to jump through 400 hoops and you're still alive after you jump through them, you get a Mickey Mouse arrangement called a 99-year lease with all sorts of restrictive terms upon it. So we can't give a title deed out. It's not very difficult.
When I was the minister, my blackfella mates said: 'This is what we want. We want a piece of paper—a title deed; the same as everyone else in the world. We want to own our own house—the same as the people in Cairns, Mareeba and Darwin own their house. We want the same thing.' Righto, mate. You can have it. We draft the forms, have them printed and put them into every council chamber. They walk into the local council—a blackfella council, not a whitefella council—take the form and fill it out. If the council doesn't object to it through meetings, you get a title deed—a freehold title—and ownership as strong as any person on earth enjoys. You've got freehold, fee simple, title with one exception. There's a clause in it that says you can't sell it to outsiders, so whitefellas can't come in and buy the whole place up and it ends up being a whitefella place instead of blackfella place. That was very, very bright of those people who developed that proposal and put that clause in.
In subsequent reading, I found out that in America they didn't put that clause in in the American reservations. Within 29 years, all the reservations were gone. A bloke wanted to buy a team of horses. He might want to buy a sulky. He might want to set up a business in the town and he borrows money. He can't repay it, so the bank forecloses on his land and they ended up with no Red Indian reserves at all.
This is about stopping foreigners from owning our country. And I think if we did a proper analysis of the ownership of the landmass of Australia—I was told at Mildura that you can drive for 37 kilometres and never set foot on a single kilometre of land that is owned by an Australian. And I heard the CEO from down there skiting that he'd been responsible for selling all those places to China and now it's working marvellously well. Ha! Well, I'll leave it to the Mildura people to figure out whether it's working marvellously well or not! But, whether you're in Mildura, whether you're in the Gulf of Carpentaria or whether you're in the central desert, figure out and have a look at who actually owns the land, and then figure out how much land we Australians own.
Fifty-two cent of Australia is on the world register of deserts. So, if you take 52 per cent out and then you take 23 per cent out, which is supposed to be owned by we First Australians—of course, we own absolutely nothing; we're told we own it, like little children, like we wouldn't really understand what ownership means—that's 85 per cent gone. Of the remaining 15 per cent, how much is owned by Australians and how much is owned by foreign countries?
I didn't pick the fight with China, and I'm not standing foursquare behind our Prime Minister on this issue. But the fact is there is a fight going on, and you people gave them ownership of your electricity, control of your water supply and sewerage supply and ownership of your land. So, in the history books, when we recall who was responsible for selling this country out, then you better look in the mirror, you people that are sitting in here. But I tell you what: Andrew Wilkie and I, we don't have to look in the mirror. We don't have to look in the mirror, because we're moving this amendment.
Before I conclude, I just want to put a picture in, because 23 per cent of that Australia can be brought back into Australian hands in the First Australian reserves if you give those people title deeds. We will be forthcoming with title deed applications to this place, and I am getting very worried that the Minister for Aboriginal Affairs is so far refusing to meet with me. I warn him: let him do so at his peril, because when he visits First Australian communities in Queensland he won't be greeted as an honoured guest. I'll tell you what'll happen to him—no, I'm not going to tell you what will happen to him. But he has been given the opportunity to become an historic figure in this nation. For the first time, since the Queensland government fell in 1990, First Australians will be able to own their own land in freehold, fee simple, title. We have a choice of doing that, or continuing to sell it out to China. (Time expired)
The original question was that this bill be now read a second time. To this, the honourable member for Rankin moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The honourable member for Kennedy has now moved as an amendment to that amendment that all words after 'whilst' be omitted with a view to substituting other words. The question now is that the amendment moved by the honourable member for Kennedy to the amendment moved by the member for Rankin be disagreed to.
It's not fair to follow the member for Kennedy in this place, because nothing will be able to replicate the tenor or the tone of his speech on my part. My focus will be on the provision of the legislation before us in my short remarks. Of course, I do rise to support the Foreign Investment Reform (Protecting Australia's National Security) Bill and subsequent legislation. I do so because—like all members I would hope in this parliament—I am deeply concerned about conserving our national security and sovereignty, and that investment of course can be used as a pathway of nefarious ends by foreign actors if it is intended to compromise our national security.
As the member for Kennedy has rightly outlined, this country is not for sale. However, we do welcome foreign investment. We always have, we always will and we will continue to do so because we're not capital xenophobes. We want to build a country that's successful so that every Australian is able to go out and realise their ambition and their dreams. We need foreign capital to invest directly in the heart of our economy and our industries to help them grow. Just like we need technology, we need investment that is going to help the success and future of our country.
I know that, for a long time, many members of the community have raised public concern about foreign investment being used as a backdoor to nefarious ends in our country. That's why the consistent approach of this government and many others has been to address these concerns through processes like the Foreign Investment Review Board to ensure that there was proper oversight. I realise that addressing that anxiety within the community isn't always achieved, because at the heart of concerns around foreign investment is the degree of influence that others will have over our country and the ownership of our country. But one of the beautiful things about the Australian Constitution is that it secures the proper recognition of property rights, and, as I wrote in my new book, The New Social Contract, that is critical to the success of the Australian continent and the modern Australian nation. But, critically, should there ever be a reason for concern, the Commonwealth can always take back property that has been purchased from any person, domestic or foreign, to make sure we secure the interests of our nation. That has not changed and that will not change, and that is protected in the Constitution if we want to exercise that power. Of course, we have to compensate people, but there is a pathway to do that. So, whether property is purchased or leased, the same provision applies: we can take it back. But, under this legislation, sometimes purchasing or leasing will not be approved in the first place. This goes to the heart and the tenor of the Prime Minister's focus—and I think he's got this absolutely bang on—on making sure not only that we secure Australia's future prosperity but also that we conserve our sovereignty. He has rightly made the observation that if you do not have your sovereignty then there is no point to your economic prosperity, and that is 100 per cent right.
This legislation, which is part of a package of reforms, includes a national security test requiring mandatory notification of investments in a sensitive national security business or land, and allowing investments not otherwise notified to be called in for review if they raise national security concerns. It has a last-resort power giving the Treasurer a final opportunity to review actions for which approvals have been given if exceptional circumstances arise, and to impose conditions or issue a disposal order where there are no other remedies for the identified national security risk. It includes stronger enforcement powers through increased penalties, direction powers and new monitoring and investigative powers in line with those of other regulators; and integrity amendments that close potential gaps in the screening regime. It includes information-sharing provisions to assist the Treasurer's and tax commissioner's compliance activities and address national security risks, and to facilitate sharing, where appropriate, with other government departments and foreign governments. It sets up a new register of foreign owned assets, amalgamating the existing registers which record all foreign interests acquired in Australian land, and water entitlements and contractual water rights, and expanding them to include business acquisitions that require foreign investment approval. It includes amendments to make foreign investment fees fairer and simpler while ensuring that foreign investors, not Australian taxpayers, bear the increase in the costs of administering the foreign investment system that are a result of the reforms. It's a comprehensive package to make sure that Australians have confidence in the system.
There will always be people who would like to see no foreign investment in Australia. That has always been the case; polling has consistently shown us that. But that is a fundamental misunderstanding of the important role of foreign investment in the growth of our country. We hope that we will continue to grow as a country and that foreign capital can be used to harness mutual benefit to build the strength of our country. A prosperous Australia is a strong Australia, and undermining a prosperous Australia will only undermine our strength and our confidence to stand up for ourselves, to defend ourselves as a country and to confront any foreign powers where we face difficult challenges. Now is not a time to go weak; now is a time to be proud and confident and prosperous and strong. That is what we should want for our country, and that is built on our economic prosperity, so that we can support the institution—the architecture—of our national sovereignty. That's what the legislation is about. It's about making sure that Australians can have the foreign investment framework so that they can have confidence that we are achieving all of those objectives.
I commend the minister, and I commend the legislation to the House.
I am supportive of the Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020 and agree that the key objectives and changes made in this legislation are important. However, I do have some concerns about the levels of unfettered discretion that this bill provides to the Treasurer, and I will deal with that matter by tabling amendments at the third reading stage and speak to those concerns at that time.
To be clear, modern Australia was built in large part on foreign investment and will continue to rely heavily on it for the foreseeable future, but that doesn't mean that all foreign investment is okay or that foreign investors should have unrestrained access to our resources and economy—quite the opposite, in fact. There are many reasons why all foreign investment should be scrutinised carefully and why sometimes it must be curtailed and even prevented. For instance, broadacre prime agricultural land, genuinely strategic assets and scarce resources should always remain in Australian ownership and under Australian control. Frankly, it was utter madness to allow a foreign investor to gain control of the Port of Darwin for 99 years. You've only got to go to the website for the Port of Darwin where they boast that they are a vital defence asset. And it's madness that foreign investors own parts of the natural gas distribution network and, as the member for Kennedy has explained, our electricity generation capability. In the case of the best agricultural land, surely a better approach would be to allow only leasehold in lieu of freehold title. Unsurprisingly, foreign investment is one of the most frequent concerns raised with me by constituents—and no wonder, when 25.5 per cent of farmland in Tasmania is owned by foreign investors. I'll say that figure again: 25.5 per cent of farmland in Tasmania is owned by foreign investors, making this state together with the Northern Territory the jurisdictions with the highest proportion of foreign ownership of agricultural land. If you strip out leasehold, then Tasmania is by far the most foreign owned jurisdiction in the Commonwealth.
Of course, Tasmania is benefiting from some of these investments, with capital improvements and the creation of jobs. But there have been many, many issues over the years, most noticeably with the sale of the Van Diemen's Land Company to the Moon Lake company. Just to explain, Van Diemen's Land Company, or VDL, is the biggest dairy-producing asset in the country, encompassing more than 20 separate farms. Surely that makes it a strategic asset. Moon Lake promised, when they bought VDL, to invest about $100 million in the farms, to create about 100 jobs and to do extensive environmental improvements, and they promised that, before long, they would be flying planeloads of fresh milk directly to China. Do you know what they have achieved? None of that. They haven't invested $100 million in capital investment, they haven't created 100 jobs, they haven't done environmental improvements and they sure aren't flying planeloads of fresh milk to other countries. None of what they promised has occurred. But I recall very, very clearly that, when this deal was on the cards in Tasmania, the government and the opposition and a whole lot of others lined up in a conga line. They couldn't do the deal quick enough with Moon Lake, and they bought all the garbage that was being spooned out to them at the time by the company that would become the new owner. And who's holding that company to account? No-one. The Foreign Investment Review Board is not challenging Moon Lake, the Australian government isn't challenging Moon Lake and the Tasmanian government isn't challenging Moon Lake. And how could they when they all celebrated the sale! No wonder the community is so disillusioned with the amount and the nature of foreign investment in this country.
The government's bill today does go a way to fixing at least some of the issues, as it provides methods of enforceability and penalties if foreign investors ignore the conditions of sale imposed by the FIRB or the Treasurer. But surely it's in our nation's best interest, in the public interest, to go much further. For starters, the Foreign Investment Review Board should apply much tougher scrutiny of investment that could adversely affect Australia's agricultural, business and property sectors, including the commercial sector, as well as our cultural, environmental and heritage wellbeing. This scrutiny must apply equally to all foreign investors with no exceptions.
An example of a specific reform that the government should be pursuing is that all purchases of agricultural land worth over $2 million should go before the Foreign Investment Review Board, instead of the current threshold of $15 million. And, as I've said already, there needs to be a much greater reliance—indeed, an insistence—on land leases, instead of selling the farm with a freehold title. Also, the current business investment requirement that all acquisitions of an interest of 20 per cent or more in any Australian business valued at over $261 million should, in fact, be applied to all foreign investment. And there must be no carve-outs—this is very important—for favoured countries or countries with which we supposedly have free trade agreements. So there should be no carve outs for investors from Chile, from China, from Japan, from Korea, from Singapore, from New Zealand and even from the United States. Moreover, residential properties should be subject to tougher foreign ownership restrictions. Yes, we've gone some way, but we've got to go further. For instance, foreigners should only be able to buy residential property if it is to genuinely be their permanent residence or genuinely their place of business. And all states and territories governments need to apply a stamp duty surcharge to foreign investors.
All of what I've described would be in the public interest and enjoy strong public support, not because of racism or any spat we might have from time to time with any one country but because we are a sovereign nation with every right and, indeed, every obligation, to safeguard and enjoy our heritage, culture and resources. Sure, we are a remarkably diverse and stable multicultural nation, the equal or better of any nation on earth. I'm immensely proud of that, but that doesn't mean we should allow the fire sale to continue. The community would not accept that, and it is not in the country's interests. So I commend the government for focusing on these issues in recent times and for bringing this bill to the parliament, but I urge the government to go much further. The bill does have my support, and I look forward to attracting the government's and the opposition's support for my amendments, which will enhance the bill.
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.
I speak in support of the amendment moved by Labor to the motion for the second reading of the Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020. As other speakers have already pointed out, this is a matter of considerable public interest out there in the community, and it's a matter that is often raised with me. It's also a matter about which there are widespread misperceptions, often causing unnecessary anxiety. But, notwithstanding any misperceptions, this is indeed important legislation because foreign investment always has been and continues to be a national security issue. That is why a Foreign Investment Review Board was established—I believe around 45 years ago.
What has very likely prompted this legislation, however, is public concern, particularly in recent years, about the level of investment originating from China—a matter that both the member for Clark and the member for Kennedy referred to in their speeches—and also the rise of China's influence in world affairs in recent times. Ironically, as we debate this legislation, Chinese investment in Australia has fallen from a peak of $15.8 billion in 2016 to $2.5 billion in 2019. I suspect that since then, although figures are not available, it has declined even further. Notwithstanding all that, I believe the legislation still addresses some of the matters that public concerns have been raised about.
The government, through this legislation, now wants to introduce a new national security test, strengthen the Treasurer's and tax commissioner's enforcement powers, expand information sharing between government departments, establish a new foreign investment register and establish a new fee structure for assessments. Whilst that all sounds good, I suspect that it is more about perception and spin than actual substance.
Foreign investment has indeed boosted the Australian economy over the years and enabled Australia to grow and prosper. That is, I believe, an undeniable fact. It has, however, also transferred major decision-making from Australia to overseas boardrooms and transferred substantial profits overseas, something which the member for Lyne alluded to in his comments and which I agree with. But, when control of a major gateway to Australia, such as the Port of Darwin, is handed over to a company linked to a foreign government, the Australian government has failed to provide the Australian people with the national security expected of it and has failed in its own national interest.
Not surprisingly, there was huge community backlash on that decision. The decision to lease the Port of Darwin for 99 years for $500 million was widely criticised, both within Australia and abroad. I believe it was a bad decision that made Australia a laughing-stock. The government did not need these new laws to have blocked the Port of Darwin lease, albeit the government will argue that that was a decision made by the Northern Territory government.
The Port of Darwin lease was not the only investment that raised eyebrows. Other investments in agricultural land, housing, commercial property, and information and communications technology all gave rise to public concerns. When it suited the Morrison government to do so it was always able to block investments, although, having said that, I note that over recent years, out of the 108,990 applications that have come before the Foreign Investment Review Board, only 10 have been rejected. It seems a very small number. I accept that many others were withdrawn, but, nevertheless, most investments get through. The government was able to block investment when it wanted to.
The Productivity Commission, in a research paper released earlier this year, stated that the term 'national interest' is undefined and ambiguous. It also stated:
This ambiguity gives Treasurers broad discretion to define the 'national interest' as they see fit …
I think that statement sums up the situation we have had for years. The Treasurer of the day has always had the ability to call in an application if the Treasurer saw fit to do so. The ambiguity gave the Treasurer considerable flexibility in determining whether the national interest was in any way being undermined. Therefore, the ability to reject a matter has always been there. That is why I believe this legislation is more about spin than substance.
According to that same research paper from the Productivity Commission, there is around $3.5 trillion of foreign investment in Australia and Australian investment overseas amounts to $2.5 trillion. That's a considerable amount. Other speakers questioned earlier today why more of that money isn't being invested in Australia rather than being sent overseas. That's a fair question. Perhaps there should be more incentives to invest that money here.
In 2018 the largest foreign investors in Australia were the USA, Japan, the UK, the Netherlands and, fifthly, China. China was well behind the USA in 2018 and even in the preceding years. Despite all the commentary about the level of China's investment in Australia, the fact remains that China sits well behind several other countries that have invested in Australia over the years. That includes investment in agricultural land, which again is a matter that was referred to by other speakers this morning. Foreign investment in agricultural land in 2018 was 13.4 per cent, and China's investment accounted for 2.3 per cent.
My concern—and I believe it's a concern shared by many other people across the country—is that those figures may not be comprehensive, because foreign ownership is very difficult to track and because in past years there was very little interest in doing so. When investment comes from an overseas country one wonders who is behind that investment and how far you need to go to track the source of the investment to find out who owns what. Even with those figures, it's clear that many other countries have been investing more in Australia than China has over past years.
That brings me to the matter of the register itself. This legislation proposes to introduce a register, and it is something that I would support. I believe it's long overdue and I believe that Australians have the right to know who is investing in Australia and, in particular, from which overseas country. Yet the proposed register will not be a public document because of, supposedly, sensitivities and privacy considerations. I'm not quite sure which sensitivities and privacy considerations should override the public interest and deny the Australian public the right to know just who is investing in Australia. If an overseas entity wants to invest in Australia that's fine, but why shouldn't they disclose exactly who they are and what they're investing in; and why shouldn't the Australian public have the right to know that? Indeed, that is one of the concerns about foreign investment and why this legislation is even before us, including the very notion of having a public register.
I also note with interest—and the member for Lyne alluded to this matter in his remarks only a few moments ago—that we have a register with respect to water ownership in this country. The member for Lyne quite rightly pointed out that about 10.4 per cent of the water in this country is owned by foreign entities. Of that, most of it, 9.4 per cent, is in the Murray-Darling Basin. My concern, similar to the member for Lyne's, is twofold. Firstly, a substantial amount of that water is owned by foreign entities at a time that many of the landholders in the Murray-Darling Basin are not getting their full water quotas. The issue there is simply this: because they can't get their full water quotas, they in turn go to the water market to buy additional water in times of need. If water is being owned by overseas entities throughout the Murray-Darling Basin purely for speculative purposes and being held in order to push the price of water up, then it disadvantages our growers, and I believe that that ought to be stopped. Secondly, I believe that if water is to be owned, regardless of whether it's by foreign entities or by people here in Australia, it ought to be tied to landownership. In other words, the water is there to support the growing of our agricultural products and should not be used by speculators as a mechanism to simply profit from whilst our farmers struggle to make ends meet. For both those reasons, I not only believe that the register is important but also believe we need to ensure that our farmers get priority over the water and get it at affordable prices.
There are other matters in this legislation that I won't go into detail on, but I note the comments with respect to much of the legislation being provided in the form of regulations. I can understand why that will be, but, because of that, it will be interesting to see how this legislation works. Labor's suggestion that there be a review of the legislation is indeed appropriate, so that we can see, after the legislation and the regulations are in place, just what other changes may be necessary or if, indeed, the legislation is meeting the objectives it needs to meet. Likewise, with respect to the fees associated with the legislation and the fees for foreign investment, those are matters that I know have caused some concern from representers and may need to be reviewed.
The last matter I will touch on, briefly, is the issue of the calling powers, which allow the minister in future to call in and review applications that have been made for foreign investments even after they have gone through. Regrettably, those powers are not retrospective and, I understand, will start from January 2021. I don't have any problems with that particular proposition, but I suspect that because of the new regulations and this new legislation it's unlikely that foreign investment will get through if it doesn't meet the standards and criteria that we are debating right here and now and that would be acceptable to the Australian public at large. So I can't see that those powers would be particularly used in the future. Nevertheless, they do give the minister of the day that additional authority and it is something that could well be used. Indeed, if that authority had been in place, perhaps the Port of Darwin—and other investments that have proven to be controversial—could have been reversed but, as it is, they can't be. With those comments, I support the amendments moved by Labor and I support the intent of this legislation.
Before the COVID-19 crisis, foreign investment into this country totalled $3.8 trillion. Our attractiveness as a destination for overseas capital has only ever been increasing. Foreign direct investment inflows to Australia in the three years to 2019 averaged 3.3 per cent of GDP, compared with an average of 1.7 per cent for other OECD countries. In particular, foreign investment in critical businesses with important implications for protecting our national security is growing. In the energy sector, for example, EnergyAustralia—one of our trio of companies which together supply nearly 70 per cent of retail customers—is owned by China Light and Power. In the ACT, 50 per cent of the power distribution company ActewAGL is owned by a joint venture of the Chinese company State Grid Corporation and Singapore Power International. State Grid Corporation also partly owns most of the distributors in Victoria as well as the largest stake in South Australia's energy transmitter, ElectraNet. Likewise, the Hong Kong listed Cheung Kong Infrastructure own a 51 per cent share in two of Victoria's distributors and in the South Australian Power Networks' electricity distribution network.
However, it is not simply very large companies making very large investments. Innogy, Neoen, Goldwind, ESCO, thyssenkrupp, Canadian Solar, Acciona and Engie are all foreign owned and are all engaged in building hundreds of megawatts worth of smaller renewable energy generation projects in Australia. Most of this investment derives from our close strategic and military allies like the United States, the United Kingdom and the European Union. However, our fastest-growing source of overseas investment is China and Hong Kong. By the end of 2019, this investment had reached a total of $218.9 billion.
In general, foreign investment is welcome. However, as I've previously described to the House, there is evidence that some foreign investment may have geopolitical intentions beyond simple commercial benefits. Analysts at the Lowy Institute, among many others, have highlighted how, for example, China's Belt and Road Initiative is designed to achieve important but unstated national security and foreign policy aims for the Chinese Communist Party. These include geopolitical priorities like providing reserve entry points for China's fuel supplies, delivering access to potential future military ports and increasing China's economic influence over other nations in our region. This is only one example among many of the foreign policy objectives that are fulfilled all over the world by foreign investments made by many national governments.
The Morrison government has already acted to protect our most significant infrastructure through the Security of Critical Infrastructure Act of 2018, which I was pleased to support. However, foreign investment can be complex, and unravelling the national security implications is not straightforward at all. Certainly many investments, even those of considerable size, have limited implications for national security. Investment in non-essential services or companies like retail chains are unlikely to be a significant risk. However, some seemingly innocuous and modest investments could have an indirect impact on our critical national security assets or organisations and that is what this bill will address.
Through my work as chair of the parliament's defence subcommittee, I've had the privilege of visiting many ADF installations. However, the sensitive asset that particularly comes to mind is Open Pool Australian Lightwater, or OPAL, in Lucas Heights. OPAL is one of the world's most effective multipurpose research facilities and is vital for Australia's medical supplies, as the deputy chair well knows. However, it's also a potentially dangerous nuclear reactor—and I say 'potentially'. The site is patrolled 24 hours a day by armed Australian Federal Police, who were a very visible presence during the time I was there. OPAL maintains a risk and audit committee and its security processes have been subject to approval by relevant Commonwealth bodies. In short, the Commonwealth has considerable control over the OPAL reactor and, of course, its security, as is right and appropriate. We would not allow foreign investment in it or in any other national security asset.
However, not far away, OPAL is surrounded with private land. It is supplied with much of the equipment and supplies it requires by private companies. Private contractors provide services, specialist technology and some personnel to the site itself. The impact that these private enterprises could have on the efficient and effective operation of this critical national security asset is potentially significant.
The same is true of those businesses which supply the ADF or our intelligence services. The commercial ecosystems that surround large and technologically complex organisations are huge. The impact they can have on the direct defence of this country should not be underestimated. The situation is perhaps even more clear in the case of critical infrastructure like energy and transport facilities. Though the government has protected these directly with the Security of Critical Infrastructure Act, the possible impact on them and on our community of any inappropriate activity among the many private suppliers and contractors could be significant.
The possibilities are not difficult to imagine. Organisations so closely linked to critical infrastructure, defence and intelligence assets could potentially put this country and its citizens at risk through the inappropriate use of sensitive data, unauthorised technology transfer and even direct interference through the disruption of supply chains or services. Such ideas are not fantasies. Overseas aggressive foreign powers have shown a strong interest in, for example, disrupting electricity supplies. Cyberattacks against the electricity grid of Ukraine in 2015 and 2016, for example, left more than 200,000 citizens without power. Media reports regarding the activities of private company Cambridge Analytica in the US and UK, and reports of Russian interference in elections in the US and elsewhere, suggest the compromising impact that a large-scale data breach by a hostile power could have on our economic and political life.
This bill will help to prevent that outcome by ensuring that the government has the ability to stop investments that are a threat to national security. Before the government's recent and temporary COVID-19 measures came into effect, private foreign investors in most sectors needed only to seek government approval for investments of more than $275 million. This means that investments in some of our most sensitive sectors like software, low-volume high-tech manufacturing and digital technology were not ordinarily screened, even where an investment could raise national security concerns. These sectors are especially important to our defence and intelligence interests, yet they are made up of many smaller, specialised companies which would not attract investments over the threshold.
The bill before the House will provide that the Treasurer must be notified of all foreign investments of any amount which involve national security businesses or land. It will also provide the Treasurer with the ability to call in any other foreign investment if he or she considers that that investment may pose a national security concern. This second power ensures that all ownership can be considered without the unnecessarily onerous requirement that absolutely every foreign investment be referred to the government. If the Treasurer identifies that a proposed investment could cause a national security concern, he can approve it with conditions which would allay that concern, require that assets be divested before the investment can go ahead or prohibit the investment entirely.
Importantly, this power is flexible. Our nation's national security situation is fluid and responsive to the actions of billions of people, businesses and state actors. The actions of foreign investors themselves will sometimes have the ability to change that. In circumstances where a significant change has taken place, the Treasurer must have the ability to review and alter previously acceptable investments if they now pose a risk to national security. Though the criteria to be met are appropriately robust, with the last-resort power this bill provides for such a rare, but important, situation.
Finally, this bill ensures that the Treasurer's new powers will be enforceable with a series of substantial new penalties for noncompliance. It also ensures that there will be comprehensive information available to the government regarding foreign ownership of assets with a potential national security implication. By creating a single public register of land, water and national security assets held in foreign ownership, the Treasurer will have the information he needs to respond to emerging threats.
From the many hundreds of millions of dollars of foreign investment into Australia each year, this measure is expected to affect only a very small number of investments. The regulatory burden and disincentive to investment will be negligible. It is estimated that the reforms will result in around 100 additional applications and 1,800 additional registrations being made by investors each year. The total compliance cost will be, in aggregate, just $1.5 million a year, and the bill further mitigates this by reducing the complexity of the fees system and removing as many of the low-risk investments from the need to make an application as possible. The Morrison government is far from alone in recognising the necessity of making this change. Between 2017 and last year, nine out of the world's 10 largest economies have introduced greater government oversight of foreign investment with national security implications.
Foreign investment across Australia is welcome. On the Sunshine Coast alone we need billions of dollars worth of new infrastructure and jobs for the future for our young people. The Morrison government is already spending more than $3.5 billion on infrastructure in my community, and more funds will always be needed. Foreign investment offers one important option for finding those funds and delivering projects quickly and efficiently. Foreign investment also helps to increase our ties with other economies in our region and encourages greater prosperity for all of us. However, as I've sought to outline today, this overseas investment is not without some risk. We cannot ignore the fact that there are growing threats to Australia's national security from some of the very nations with which we trade. The world's strategic situation is rapidly changing, and competition between nations for exports and investment is ever increasing. We cannot guarantee that a state which is our friend today will not have powerful incentives to act against our national interest tomorrow. We need a foreign investment screening process which is robust, comprehensive and flexible to meet those changing threats. Alongside the government's legislation on critical infrastructure and arrangements with states and territories, this bill is another important step towards securing our nation from foreign interference. I commend the bill to the House.
I'm glad to say something in the debate on the Foreign Investment Reform (Protecting Australia’s National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020. As the member for Fisher observed, at a time of COVID-19, nations around the world are considering their circumstances. At a time when we reflect on matters of national security and broad public wellbeing, countries have an interest in ensuring that appropriate regard is given to how we own and control certain essential parts of our economy and our public service delivery world, and that has been true here in Australia. This bill, essentially, provides greater capacity to screen proposed foreign investments in Australia.
There's always been a regime in place—the Foreign Investment Review Board—that has facilitated that kind of screening. Typically, there are certain areas where consideration is particularly relevant. There are value thresholds that are set, and, if you fall below a particular value threshold, you may not be subject to screening. In the circumstances of a global pandemic, Australia, like other countries, is reconsidering how we apply that screen or that filter to proposed investments so that we can be sure of protecting Australia's national interest.
I would observe that this change, to some degree, runs against some of the things that have been done in recent bilateral or multilateral trade agreements. Foreign Investment Review Board settings are often part of trade agreements, and, in Australia's case, because we are a virtually tariff-free jurisdiction, when it comes to settling trade agreements, we have to think about the kinds of things we can negotiate with. They include intellectual property rights. They can sometimes include—wrongly, in my view—temporary foreign labour access without proper labour market testing and so on. They can certainly go to the conditions in which investment is allowed, including the Foreign Investment Review Board settings. So there have been a number of trade agreements in which we've essentially said to other countries that part of what we're prepared to offer them is different thresholds. Of course, when you come along with the change that's being made in this bill, you basically take that back to zero. So, if there's an appropriate national security concern, then it doesn't matter how low the quantum of the investment is; it can still be called in and looked at.
Of course, while agreeing to the bill, we on this side note that there are aspects of the way the bill will work that are yet to be determined because the definition of 'national security business' and the definition of 'national security land' will be determined by regulation subordinate to this bill. But, certainly, it's already the case that some of the countries with whom we've entered into trade agreements in recent times have noted with some concern the kinds of changes that are being made here. I think it was Mexico, one of the signatories to the Trans-Pacific Partnership 11, that expressed some concern back in October about what Australia was doing with respect to investment screening. So it does beg the question, going forward, how that will change the investment landscape globally. As a person who has spoken many times about the dangers of investor-state dispute resolution mechanisms, I also say that it's quite possible that investor-state dispute resolution mechanisms would be used to challenge the kind of thing that we're proposing here. It's not out of the question that a nation whose company is seeking to invest in Australia and is blocked on national security or national interest grounds may seek to challenge that in one of these tribunals, and that's something that we should be concerned about. It's right that in a relatively short time, in six to twelve months, we should look to review what's being done by this bill. It's something that was first proposed in June. We're putting it in place now, in December. There have been many concerns raised by stakeholders, investment experts and civil society groups about how exactly this will work. As I said earlier, some definitional aspects of it have yet to be established, so it's right that we should have a good look at it shortly.
Broadly, the bill goes to the question of how we protect Australia's national interest and national security. In that area—foreign investment, foreign ownership, sovereign capability and self-sufficiency—there are many bits and pieces, and this part just goes to how you screen and consider proposed foreign investment. As we do this, it's worth all of us in this place reflecting, and certainly I think it's worth the government reflecting, on some of the other key areas around national security and national interest control.
I don't think there's any doubt that this government was a bit late to the game in relation to critical commodities. We are blessed in Australia, in addition to having a lot of traditional resources, to be well represented when it comes to so-called new energy metals, the kinds of resources that are going to be necessary in the renewable energy transformation that is occurring around the world. We should have taken a comprehensive look at those resources much earlier—how important they are, where they are, who's investing in them, what purposes they're used for and so on. The definition of 'critical commodity' is something that is rare but vitally important.
The United States got going on this front earlier than Australia did, probably back in 2017. They landed their strategy. The Morrison government's strategy wasn't settled until last year. But some of the observations in the US strategic assessment were sobering. The US identified 31 critical minerals. I think 14 of the 31 were entirely imported. For close to half of those critical minerals, the United States is entirely reliant on imports. We have joined with the United States in looking at a couple of minerals in recent times where you could almost say the ship has sailed. There are a couple of key minerals for which China controls around 85 per cent to 90 per cent of global production. It would be healthier for the globe if critical minerals were not concentrated necessarily in that way. It would certainly be critical for Australia. So I think that's something the government should look a bit more closely at in future.
When you think about areas of national security and national interest where that question of protecting Australian ownership has already disappeared, there's none that sticks out more plainly and more worryingly than Australian shipping: 99 per cent, I think, of imports and exports to Australia go by ship. This isn't surprising; we're an island continent. Three decades ago, our national merchant fleet had 100 ships: 100 owned and flagged Australian vessels. That's an issue the member for Maribyrnong has identified and argued about repeatedly over the last five years plus. It's why Labor went to the last election with a proposal to create an Australian strategic fleet. We talk about Australian ownership and national security and our capacity to be masters of our own destination, but we've gone from having 100 ships in our merchant fleet, three decades ago, to having 10. That's where we sit now, and with not a single Australian flagged and owned fuel tanker. That's no basis on which to maintain your sovereign self-sufficiency and security position when you are an island continent, and yet that's not just been allowed to happen; it's been a positive policy of neglect that coalition governments, both this one and the previous one, have prosecuted. Their almost laughable use of permanent temporary permits, which have meant that our shipping might, by some people's estimation, become more efficient, have made us really vulnerable. And it's not just the assets themselves. It's not just the ships that we no longer own, that are no longer flagged here; it's the maritime workforce that goes with that shipping.
One thing we've certainly discovered through COVID-19 is, if you want to take a fast and loose, just-in-time inventory management approach to all the things that we rely on and all the things that come here by ship, you're going to get caught out if there's a global crisis, if there's any kind of interference or separation as far as freight and logistics on a national base. Australians are going to get hurt and they're going to get hurt quite quickly. From government that bang the national security drum—it's one of their favourite instruments; they bang the national security drum a lot—they cannot be serious about our national security and turn a blind eye to the circumstances of Australian shipping. It is a scandal.
Mr Katter interjecting—
The member for Kennedy is quite right. If you take the next step from shipping you go to our liquid fuel insecurity. When you don't own and operate an Australian tanker and you're relying on foreign shipping to get liquid fuel to you, you'll be doubly worried when you consider that at various times we've only got 20-odd days of liquid fuel. That position has been in place for many years, and the government has been incredibly slow to do anything about it. We were supposed to get the final report of the review into liquid fuel security at the end of 2017. We still haven't got that report. We've been out of compliance with our IEA requirements for some time. We're the only country, I think, out of compliance. We're supposed to be lodging a strategy shortly to be back in compliance by 2026. I will not hold my breath.
Things, in many ways, are getting worse before they get better. We've seen in my own home state of Western Australia the proposal to close the BP refinery. It's not the case that that refinery is the only one that's in trouble; other refineries are in trouble as well. That means we won't be importing crude, potentially. We'll have to rely on refined fuel, and that puts us at greater risk. So we support this bill, but there are many other areas of national security interest that the government should attend to and hasn't done a great job of over the last seven years.