AUSTRALIAN PARLIAMENT HOUSE
WEDNESDAY, 23 NOVEMBER 2016
I rise representing the member for Blaxland, who is Labor's shadow minister for trade and investment and is presently on parental leave. At the outset I note that the opposition were not provided in advance with a copy of the statement or the document that the minister has tabled, so my comments will be of a general nature responding to the minister's speech and discussing the coalition's role in the fall in Australian investment that we have seen over recent years.
Labor acknowledges the benefits to Australia of foreign investment. As Senator Wong recently noted:
“Last year Australians saved just over $363 billion, yet investment in our economy was nearly $425 billion. This was, of course, nothing out of the ordinary. Over the last four decades, the gap between Australia's national savings and investment has averaged around 4 per cent of GDP.”
By tapping into foreign investment Australia is using the savings of other nations in order to finance investment in our own country. Foreign investment ensures that we enjoy higher living standards and that we have a more productive economy and more sustainable industries. To do away with foreign investment would be to see employment decrease, wages fall, prices rise and the choices offered to consumers decrease.
As the shadow minister for trade and investment, Jason Clare, has noted, ‘Asia is the key to Australia's success in the years ahead. There will be three billion middle-class consumers north of us by 2030 and the key for Australia is making sure that we sell our products and our services to Asia—that we get a fair share of that market.’ The member for Blaxland has noted Labor's strong history of support for open markets.
As the Trade Minister has noted, the statistics on inbound investment are concerning. An OECD report brought down in April this year noted that foreign direct investment flows to Australia fell by A$23 billion, or 44 per cent, last year. That came despite inbound FDI inflows across the OECD’s 34 member nations almost doubling in 2015. And it followed disappointing investment results for Australia in 2014, when foreign direct investment inflows declined by 30 per cent. So under the coalition in recent years we have seen a decline in Australia's inbound investment. I will return later in my remarks to the role that coalition policies may have played in that fall.
But it is important to put on record the role that foreign investment has played in the development of the Australian economy. In 1855 CSR's investment helped to shape our sugar industry. In 1877 we saw the United States firm Schweppes set up in Australia. In the 1920s we saw Kraft and Kellogg investing in Australia and, as David Uren points out in his terrific book on foreign investment, one of the great ironies is that Vegemite may never have become the global success story that it is without foreign investment from Kraft.
Foreign investment in our beef industry from Britain, the United States and Japan has been critical in developing that industry. Investors like the controversial Vestey family, International Ranchers, and King Ranch, from Texas, have been important in our beef industry. Kodak set up here in 1908, Coca-Cola and Heinz in the 1930s and of course there is automotive foreign investment. The foreign investment in Australia by automotive firms, including General Motors, Ford, Chrysler, Leyland, Toyota and Nissan, were important in creating well-paying Australian jobs. And the role of this government in goading Holden to leave has had a damaging effect, particularly on the South Australian economy. The withdrawal of foreign investment is one of the chief challenges that South Australia faces at the moment.
Foreign investment has also been important in the media industry. I often have to chuckle when I see stories in tabloids railing against foreign investment. Without foreign investment from companies such as News Limited there would be fewer Australian journalists employed in Australia.
Labor's support for foreign investment is longstanding and is of a piece with Labor's support for a strong immigration system and for the benefits of a global trading system. Those on the other side of the House have a track record which has not always been strongly in favour of foreign investment. Black Jack McEwen—John McEwen—once said:
“It is not good enough for this country to live by selling a bit of its heritage every year. We do not want to see Australia have its industries unduly owned in foreign hands.”
Prime Minister John Gorton, travelling in Britain, once said:
“… it has seemed to me that the posture of Australia in seeking overseas capital had been the posture of a puppy lying on its back with all legs in the air and its stomach exposed saying please, please, please give us capital. Oh, tickle my tummy. On any conditions.”
While McEwen and Gorton are long gone, their heirs are still here in this parliament in those who would prefer to fear-monger over foreign investment rather than acknowledge its benefits.
On this side of the house, Labor has been strong in arguing for economic openness. As David Uren has noted:
“Labor has staked an even more liberal position than that espoused by the Liberal's …”
That was starkly on display when Archer Daniel Midlands made their bid for GrainCorp—a bid that those of us on this side of the House said, based on the publicly-available information, should have been broadly supported. But it was ultimately blocked by coalition Treasurer Hockey, making it the first major United States foreign investment bid to have been blocked.
The coalition has also introduced significant amounts of red tape around Australia's foreign investment. Senator Wong has pointed out that when it came to the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 the exposure draft and regulations accounted for more than 170 pages and were accompanied by a 105-page explanatory guide. As one of the former Minister for Trade's own investments specialists pointed out:
“… the new fees have fuelled the narrative around Australia being a high-cost destination to invest in.”
What did the Office of Best Practice Regulation have to say about this?
They admitted that this new red tape burden was being imposed last year without proper assessment and with the increased regulatory burden.
Under the government's proposals, we have 22 different screening thresholds and categories, which vary depending on the value and type of investment, and the nationality of the investor. When it comes to application fees, there are 33 different levels and categories of application fees, ranging from $5,000 to $100,000—a twentyfold difference in application fees.
To take one straightforward example, we can look at the screening threshold differences for investments in agricultural land. For investment that comes from Chile, New Zealand and the United States, the screening threshold is $1,094 million; for investments from Singapore and Thailand—where the land is used wholly or exclusively for a primary production business—the screening threshold is $50 million. For investment in agricultural land coming from other countries, the screening threshold is $15 million.
These differential screening thresholds have raised concerns among many. When the government's Foreign Acquisitions and Takeovers Legislation Amendment Bill was released, it was criticised by the Business Council of Australia, the National Farmers' Federation, the Food and Grocery Council, the Queensland Farmers' Federation and the Chamber of Commerce and Industry of Western Australia. As the Business of Council of Australia noted:
‘The government has declared that it is 'open for business', however its recent decisions have sent the opposite message to potential international investors considering investing in the Australian agrifood sector.’
Those of us on this side of the House have no objections to new investment awards, but no-one is giving this government a gold medal for its investment policy, which has discriminatory screening thresholds applied inconsistently.
We should note, too, that the government's approach to foreign investment in agricultural land has been ad hoc. The minister correctly noted that agriculture is a very small share of all foreign direct investment into Australia. As at the end of 2014, foreign direct investments into agriculture were just $1.3 billion out of a total of $688 billion of foreign direct investment—that is just 0.2 per cent of all foreign direct investment. By comparison, mining accounted for 39 per cent and manufacturing for 13 per cent.
But concerns have been stoked over foreign investment into Australian agricultural land, chiefly by the member for New England who is, if anyone is, the heir to 'Black Jack' McEwen in this chamber today. The minister promised that there would be a public register which would allow members of the public to see the location and size of agricultural properties with foreign ownership. He said it would be like a map of all properties 'to see who owns what'. Now the member for New England has changed his tune, saying that only the aggregated data for the new registry will be made public.
To the extent that we have those data, the Australian Bureau of Statistics’ Agricultural Land and Water Ownership Survey showed that 99 per cent of Australian farm businesses were fully Australian owned in 2013, that 88 per cent of farmland by area was Australian owned and that a further five per cent was majority Australian owned. This stands in contrast with the corporate sector, where Australian financial corporations are nearly 55 per cent foreign owned and non-financial corporations are over 40 per cent foreign owned. To take one example of a large multinational, the big Australian—BHP—has the majority of its shareholders overseas.
The debate over foreign ownership of agricultural land needs to be grounded in facts, not fear. Labor supports an evidence based approach to this issue, but we are concerned when the member for New England seeks to make political capital from this issue. Indeed, his comments stand starkly in contrast to the more sober and considered statements from the minister in the chamber today.
At the last election, Labor took a policy to the Australian electorate pledging to make Australia a more attractive destination for investors and to support jobs by liberalising screening thresholds for the farm and food sectors.
We pledged that Labor would increase the screening threshold for investment in agricultural land to $50 million, non-cumulative, bringing all investors into line with the agricultural land threshold under the Howard government's trade agreements with Singapore and Thailand.
We said that we would remove the agribusiness screening category, a reform that would put agribusiness on the same footing as other investors.
We said that we would review the current system's discriminatory treatment of investments in non-sensitive sectors by investors from Singapore, Thailand and non-free trade agreement trading partners, as well as the treatment of agricultural land under the Foreign Investment Review Board's framework.
Labor supports the role of the Foreign Investment Review Board, established in 1972 in response to the then horrifying prospect that the Chiko Roll might be sold off to foreigners. But we do see it as important that our foreign investment screening process has more consistency to it, that it does not have discriminatory screening thresholds based on nationality.
In the few minutes remaining to me, I cannot but respond to the minister's comments on company tax. It seems that, whatever the problem is that Australia faces, this government's response is to cut the company tax rate. As the member for Blaxland noted over the weekend, if you asked them what their solution was to the current woes of the Australian cricket team, they would probably say, 'Let's bring down the company tax rate.'
But we have to compare our Australian company tax rate with the company tax rate in the largest economies of the world. In the United States, the corporate tax rate is 35 per cent. In Germany, the European Union’s powerhouse, it is 29.65 per cent. In the top 10 economies in the world the average corporate tax rate is 29 per cent. Here in Australia it is 28½ per cent for small businesses and 30 per cent for larger businesses. So, even without considering imputation, the corporate tax rate in Australia is comparable to the corporate tax rate in the largest economies in the world.
Yes, there have been suggestions that, under President-elect Trump, the United States might cut its corporate tax rate. But does Australia really want to be going down the road of Trumponomics? Do we really want to get into the prospect of following a tax plan which, according to independent experts, could add between $5 trillion and $10 trillion to debt in the United States?
Here in Australia we have had debt rising rapidly under the coalition. Since the coalition won office, debt has risen by over $100 billion—more than $5,000 for every man, woman and child in Australia. The rate of increase in Australia's debt has been more rapid under the Abbott-Turnbull governments than it was under the Rudd and Gillard governments. Under the Rudd and Gillard governments, Australian debt rose on average by $4.5 billion per month. Of course, that debt was taken on largely in order to address the global financial crisis, the largest downturn since the Great Depression. Every serious commentator accepted that Australia had to take on debt, because after all we were only left with razor-thin surpluses from the Howard years. All serious commentators—and I think it was even accepted by sensible people in the coalition at the time—knew that Australia needed to take on debt to deal with the global financial crisis.
But, since the coalition has taken over office, in a period in which we did not have a global financial crisis, debt has risen at a rate of $4.9 billion per month. That is right: the rate of increase in Australia's debt has been more rapid under the Abbott-Turnbull governments with no global financial crisis than it was under Labor with a global financial crisis. So now is surely not the time to talk about a massive corporate tax giveaway, a $50 billion corporate tax cut, at a time when Australia's headline company tax rate is in line with the largest 10 economies in the world.
Of course, no serious conversation about company tax can proceed with acknowledging that we have dividend imputation, a system shared only with New Zealand in the OECD, and which ensures that we give about a third of the company tax revenue back through the personal income tax system. A 30 per cent company tax rate with imputation raises about as much revenue as a 20 per cent company tax rate without imputation. So, from a fiscal perspective, Australia's headline corporation tax rate for large companies of 30 per cent ought to be compared to other countries that have a 20 per cent tax rate without imputation. This point is often either ignored or deliberately left off the table when people are comparing company tax rates. But to do so is deeply misleading and ignores the impact on the Australian budget.
So, in conclusion, Labor concurs with the coalition about the value of foreign investment in creating jobs, raising productivity, ensuring that we have more competition and lower prices. But we do believe that the coalition has presided over a fall in inbound investment and that that fall in inbound investment can be traced in part to the hodge-podge of restrictive rules that have been placed around foreign investment, to the discriminatory screening thresholds and to this government's willingness to play footsie with the extremists who want to scaremonger over a foreign investment.
The debate over foreign investment needs to be conducted soberly and sensibly, recognising its historic benefits to Australia and recognising that, through a sensible system of screening under the Foreign Investment Review Board, foreign investment can be of benefit to the Australian economy over the long run.