Thursday, 25 November 2021
by leave—I stand to present the government's annual investment statement.
The government first committed to deliver this annual statement in 2013. At the same time, it created the first federal minister for both trade and investment in recognition of the indivisibility of those critical contributors to Australian jobs, growth and our way of life.
Increasing investment has taken on greater importance as we emerge from COVID-19.
Current state of investment flows and stock
Today, I am releasing the International Investment Australia 2020 Report.
The report shows that net foreign direct investment flows into Australia in 2020 fell 48 per cent from 2019 levels, reflecting a global decline in FDI flows due to the pandemic.
While this was a large reduction, Australia fared better than many developed economies, which declined by around 58 per cent on average over the same period.
The value of FDI stock in Australia remained stable over the last year at $1 trillion.
FDI supports one in 10 jobs and about 40 per cent of exports in Australia.
The number and value of approved investments in Australia has held up well in recent years, including in 2020.
The United Nations Conference on Trade and Development (UNCTAD) reports the value of announced greenfield projects in Australia increased by almost nine per cent compared with an 18 per cent decrease in similar flows to all other developed economies.
There are several reasons Australia has remained an attractive destination for investment through the pandemic:
But perhaps most importantly, our strong and well-managed economy has given us the fiscal firepower to support our economy through the pandemic.
Investment as key part of our recovery
All nations are grappling with an increasingly complex and challenging global environment, which is why the coalition government has implemented a series of reforms to our foreign investment review framework over the last year.
Our system is focused on promoting business certainty and delivering timely foreign investment decisions, while ensuring that investments are not contrary to the national interest and national security.
At the same time, the Global Business and Talent Attraction Taskforce is looking at how we can identify and attract more high-value businesses and exceptional talent to Australia.
With the widespread rollout of vaccines, the reopening of Australia's borders is proceeding well.
The government is conscious that, over the past 18 months, restrictions on entering Australia have been frustrating for many international investors.
So we are glad that, from 1 December, we will proceed to the next stage of the reopening of our international borders, under which fully vaccinated eligible visa holders will be able to enter Australia.
We are very much looking forward to welcoming our foreign investors back to Australia in person. In short, Australia is open to foreign investment, and we want those foreign investors to return in large numbers.
Investment underpinning efforts to address climate change
At the same time, the government is focused on supporting businesses to grow.
Our $1.3 billion Modern Manufacturing Initiative encourages investment in key areas of comparative advantage and strategic importance:
Already, foreign investment is playing a significant role in our efforts to address the impacts of climate change and support the transition to a new energy economy.
The government is investing $20 billion in the decade to 2030 to support the commercialisation of low-emissions technologies. We hope to leverage up to $80 billion in private investment.
Our focus is on cost breakthroughs in clean hydrogen, energy storage, carbon capture and storage, solar, green steel and aluminium and measuring soil carbon.
The Hydrogen Energy Supply Chain (HESC) operation in Victoria, for example, is a world-first project that will produce clean liquid hydrogen for export to Japan.
Neoen, a French energy utility company, has invested more than $3 billion over the last decade in Australia's renewables sector.
It has 14 large-scale renewable energy projects across Australia, with two gigawatts of assets in operation or under construction.
These projects include the 400-megawatt Western Downs Green Power Hub in Queensland; the Goyder South wind, solar and battery storage project in South Australia; and the 300-megawatt Victorian Big Battery near Geelong.
In critical minerals and rare earths, we want Australia to become a world leader in the extraction, processing and supply of these inputs to semiconductors, mobile phones, wind turbines, electric cars, solar panels and other high-tech products.
We are already the world's top producer of lithium and the largest supplier of refined rare earth products outside China.
We have seen early success stories like Lynas, Australian Strategic Materials, Renascor and Pilbara Minerals.
In the food and beverage sector, Chobani is a great success story out of Victoria.
Chobani has ambitious growth plans and is committed to ongoing investment in Australia with its continued commitment to manufacturing innovation, not only supporting local manufacturing jobs but also supporting Victorian dairy farmers and local supply chains.
Global technology company Thales, who operate in defence, security, transport, aerospace and space, spent $657 million with over 1,800 Australian suppliers in 2020. This supported over 2,000 jobs.
In high-value research, I would like to recognise Bosch for its role in bringing new skills and capabilities to Australia's manufacturing sector.
Bosch employs a large workforce of engineers and technology specialists in Australia.
It is a leader in innovation through its work in the development and application of vehicle electronics and safety systems, cybersecurity gateways and driver assistance systems for the global car industry as well as in agritechnology and advanced manufacturing systems.
Investment supporting recovery underpinned by trade
There are opportunities through trade to secure greater foreign investment.
We have a promising program of trade negotiations to deliver more investment for Australia.
In the last year, we have made substantial progress towards finalising free trade agreements with the United Kingdom and the European Union, two of our four largest sources of foreign investment.
These agreements will not only support Australia's economic recovery from COVID-19 but also help diversify our trade and strengthen trade and investment in major global markets.
Australia has come through this pandemic in a strong position, and in the recovery phase ahead investment will be vital to our continued economic growth, employment and future resilience.
Despite the challenges posed to the global economy by the pandemic, Australia remains an attractive destination for foreign investment.
The Morrison government is committed to ensuring we have the right settings to take advantage of opportunities to attract foreign investment.
Whether it's through trade negotiations, border settings or conditions for business, each is carefully calibrated to contribute to investment being a constructive and productive element of Australia's economic profile, contributing to jobs and growth for all Australians.
The minister noted that the government committed to deliver this annual statement in 2013, and I thank the minister today for making this statement to the House in 2021. Members may remember that last year's ministerial statement on investment was given by the former minister, Senator Birmingham, at an awards night dinner for exporters hosted by his own agencies. What a treat for those award winners—a half-hour, self-congratulatory speech from the minister! The 2019 so-called annual investment statement is, of course, nowhere to be found. This is emblematic of this government's basic instincts of spin over substance, announceable over action, photo-op over follow-up. Instead of subjecting the government's record to the accountability of parliament, the former minister gave a self-indulgent speech at his own party. So I'm very glad, and welcome the fact, that the government has brought the annual investment statement back to the parliament after this two-year absence.
Australia benefits from an internationally competitive and open economy. While the discourse tends to centre on trade, international delegations, growing export market and free trade agreements—investment, the other pillar of economic strength and resilience upon which the Australian economy balances, is, at times, overlooked. And, in the moments when it is not overlooked, foreign investment is weaponised by populist politicians seeking to inject fear of foreign investment into the community. In truth, Australia has depended on foreign investment for its development since British settlement. Since that time, foreign investment has changed and grown. Of the approximately $4 trillion invested in Australia, which includes passive portfolio investment, most is from the United States; the United Kingdom; Belgium, acting for the EU; followed by Japan. Of the $4 trillion total, around $1 trillion, as the minister noted, is foreign direct investment. So foreign direct investment makes up around 25 per cent of all incoming foreign investment to this country.
The first regulation of foreign investment in Australia emerged in 1972. The catalyst was a curious food product present in bain-maries at roadhouses around the country. The Chiko Roll was sold in the tens of millions per annum when the US company IT&T sought to buy the Aussie company. The idea of Americans buying out an Australian food icon led to an immense public backlash. The controversy reached this parliament—well, it was down the hill then—and it has been noted that the cabinet meeting over the Chiko Roll was the beginning of the regulation of foreign investment in Australia. I thank my colleague the member for Fenner for reminding me of this curious fact, and I do recommend his work on openness, which sets out a very good case for an Australian society and economy that is open to the world.
The sale of Australian brands remains controversial. Some might recall the public discourse, verging on an Armageddon event, when Vegemite was sold to a foreign company. But often this is the only way to save a business. The question is: would we rather lose the product entirely or have it be saved and have the investment to reinvent that product? We see the story of RM Williams, created in 1932 and owned since 2013 by the luxury brand the LVMH group. It has now been returned to Australian ownership. It's a great story.
Foreign investment creates opportunities and it creates jobs for Australians in Australia. Think of resources companies like Rio Tinto and BHP and how many people they employ. Both iron ore giants are three-quarters foreign owned and they engage 45,000 and 22,000 employees and contractors respectively. The resources industry is more broadly central to the history of foreign investment in Australia. In April 1985, Bob Hawke stood alongside Chinese Communist Party boss Hu Yaobang atop an iron-rich hill in the Pilbara and commenced a new era of Sino-Australian economic relations. Hawke's ambition that day was for China and Australia to invest jointly in an iron ore mine, a prospect he'd raised with Premier Zhao Ziyang in Beijing a year earlier. Prime Minister Hawke's active involvement paved the way for the signing of the Channar joint venture agreement between Rio Tinto and Sinosteel in 1987. This was China's first major overseas investment. More than 250 million tonnes of iron ore have since been shipped to China, creating thousands of jobs and billions of dollars in export revenue for Australia. In 2020, China's foreign investment in Australia totalled over $70,000 million. That accounts for two per cent of foreign investment and is our ninth-largest source of such investment.
The US and the UK remain the biggest foreign investors in this country. Another significant contributor of foreign direct investment is our regional neighbour Japan. Japan has been one of Australia's largest trade and investment partners for more than 60 years, and this is a testament to the strong ties that bind our two countries together. Japan helped build Australia's LNG industry. LNG requires big outlays, even compared to iron ore production. Shell and BHP in joint venture partnership with Woodside had to pay $3 billion upfront to start developing the North West Shelf due to the complex system of drilling offshore, processing offshore and liquefying for export.
Once the Whitlam government approved LNG exports in the 1970s, the Western Australian government secured Japanese capital investment via long-term sale contracts to build a gas pipeline from Dampier to Perth. The pipeline covers more than 1,597 kilometres, starting from the Burrup Peninsula in the state's north-west and finishing near Bunbury in the state's south-west. This allowed for the remainder to be sold off to power other projects in the Pilbara. The Dampier to Bunbury pipeline still plays a central role in WA's economy, bringing natural gas from the Pilbara to electricity generation plants near the population centres in the south. It's a remarkable achievement. The first LNG cargo from the North West Shelf arrived in Tokyo in 1989. LNG cargoes continue out of Karratha to this day, and, more recently, the Japanese company INPEX established the Ichthys project off the coast of Western Australia and in Darwin with an investment of $40 billion. With this, Australia has become the destination for Japan's largest ever overseas investment.
Such a strong history of investment in this country should cause us all to ask: where to next? The minister's statement takes us through what everyone else is doing in relation to critical minerals and rare earths. But what is the government doing to try and supercharge this future-facing industry? There are a few policies there, but I'd argue it's not terribly much, and it's definitely not enough. There is much said about establishing a lithium battery industry in this country, but, as yet, we haven't seen a government effort to attract investment from the battery-producing powerhouses of Japan and South Korea to build Australia's capacity beyond basic processing of lithium, nickel and rare earths. The truth is that, under this government, business investment is going backwards. Investment is down over 20 per cent since the Liberals came to office in 2013. Investment is at its lowest level since the 1990s recession, and this was before the pandemic. The COVID-19 pandemic cannot always continue to be an excuse for underperformance. The Abbott-Turnbull-Morrison governments, over eight long years, have simply not provided the right investment conditions to support the economy across key areas like manufacturing, energy and resources, the care economy, and research and development.
Right now, the greatest threat to critical foreign investment is this government's lacklustre, lazy and frankly irresponsible approach to policy to address the true challenge of climate change. The minister set out some efforts, but I think this is too little, too late. Foreign investment funds are openly warning that they are considering cutting billions of dollars of investments into Australia because of this government's half-hearted commitment to a 2050 net zero emissions target. The Investor Group on Climate Change, which includes AustralianSuper—the nation's biggest super fund and among the top 20 in the world—UniSuper and Lendlease, released an analysis last month confirming climate policy uncertainty was a turn-off to international investors. Australia has become among the least attractive destinations for institutional investment in clean energy for industries of the future.
This is a damning indictment of this Liberal-National government. It has failed to put forward any believable policies, and the result is that erstwhile international investors in Australian industry turn away and look elsewhere. The deputy governor of the Reserve Bank Guy Debelle recently warned of climate risks in the Australian financial system. He made the very obvious point, which this government likes to ignore:
Investors will adjust their portfolios in response to climate risks. Governments in other jurisdictions are implementing net zero policies. Both of these are effectively increasing the cost of emissions-intensive activities in Australia. So, irrespective of whether we think these adjustments are appropriate or fair, they are happening and we need to take account of that. The material risk is that these forces are going to intensify from here.
I'd like to reflect very briefly—
I'll reflect briefly on our own investment super powerhouse, the superannuation savings of all Australian workers. It's a remarkable thing that just a few months ago assets under management in the Australian super system reached $3.4 trillion. Through every worker in Australia and their super contributions to this extraordinary pool of savings, it is now the fourth largest in the world. Every worker in this country has contributed to Australia becoming a true investment super power on the world stage. The investment capacity of this nation has a role to play in securing the infrastructure and economic development of the Indo-Pacific, investing in regional neighbours while supporting Australia's national interests.
It is indeed a virtuous circle: the investment of Aussie super into the economies of our neighbours builds a prosperous and peaceful neighbourhood, which in turn provides excellent opportunities for Australian exporters. In fact, Australian superannuation capital is on the path to join iron ore, natural gas and amazing red wine as a famous national export. Like foreign investment here, our own investments around the world are a sensible means to create jobs, raise living standards, increase prosperity and ensure peace across the region. Thank you, Deputy Speaker, for your indulgence.