ANNUAL INVESTMENT STATEMENT TO THE PARLIAMENT
FEDERATION CHAMBER, CANBERRA
WEDNESDAY, 6 DECEMBER 2017
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I thank the Minister for his Statement to the House.
Foreign Investment is very important to Australia.
In many ways our country is built on it.
A lot of the farms that helped Australia ride on the sheep’s back were developed with foreign investment – companies like the Australian Agricultural Company which was founded with investment from the United Kingdom and still exists today.
The same is true of the resources sector.
Companies like BHP are around three quarters foreign owned.
A lot of our manufacturing industry – which still employs almost one million people – wouldn’t exist without foreign investment.
Particularly from the US, the UK, Japan, the Netherlands and China –the top five sources of foreign investment.
Foreign Investment creates jobs.
Jobs that wouldn’t exist if that money wasn’t injected into our economy.
As the former Minister for Trade and Investment Andrew Robb said in the second of these statements to the House two years ago, “every $1 billion of foreign investment creates 1000 more jobs here in Australia”.
If you pull that money out it means higher unemployment.
It’s as simple as that.
A lot of people think that you can just get rid of foreign investment and replace it with local funds.
We can’t.
The bottom line is we need more money to build the businesses and roads and railways and ports and airports and other infrastructure that we need than we have local funds available to do that.
In 2016 that gap was about $44 billion.
Foreign investment fills that gap.
That $44 billion gap.
It provides the extra money we need and boosts economic growth and creates more jobs with it.
Without it fewer things get built.
There are fewer jobs.
And potentially some businesses could go under.
Foreign investment doesn’t just bring more money into the country and create more jobs.
For a lot of Australian businesses it can also bring new skills and expertise and IP that can help that company grow.
Bigger businesses, more jobs, and more economic growth also mean more company tax is paid by that Australian company here in Australia and more income tax is paid by the people who work there that help to pay for the things that are so important – things like schools and hospitals that help to pay the salaries of police officers, nurses and teachers.
This doesn’t mean though that foreign investment is popular.
It’s not.
There are a lot of people in the community who aren’t convinced about the merits of foreign investment.
As my colleague the Shadow Assistant Treasurer Andrew Leigh says in his recent book “Choosing Openness”:
“There may be no other issue on which economists and the general public disagree more.”
He’s right.
Members of Parliament who have this conversation with our constituents would often see that.
Some types of foreign investment are more popular than others.
Australians are generally supportive of foreign investment in our manufacturing industry and finance.
Pretty evenly split when it comes to resources, ports and airports.
But you’ll find they’re pretty strongly opposed to foreign investment in Australian farms and residential property.
I suspect nothing is going to change the views of people who are dead set against foreign investment.
But information is important here – so at least Australians that are worried about this know exactly what is going on.
The Agricultural Land Register is useful in this regard.
It shows that as of 30 June this year, 13.6 per cent of Australian farmland is foreign owned.
Less I suspect than most Australians would have thought.
It also shows that Britain is the largest foreign investor in Australian agricultural land with 2.6 per cent and Chinese companies owning 2.5 percent.
Again less I think than most people would suspect.
I’d argue though that the land register could go further though.
As Mr Tony Mahar, the CEO of the Farmers’ Federation has said:
“This report is a good blunt overview of the landmass but in terms of either control or influence or impact on the supply chain or sector itself we need more data and numbers to give us a better and fuller picture.”
When we were last in Government we proposed a foreign ownership register which would allow every Australia to see who has purchased what, where, and for how much – something the Coalition promised to match.
However that hasn’t eventuated and I share the concerns of the Shadow Minister for Agriculture that the Coalition’s promise has not been kept.
I encourage the Government to have a look at this and to continue to develop a more comprehensive register and keep the promise to make it as transparent as possible.
We also look forward to the development of the Water Register which is expected to be completed I think towards the end of this financial year.
The aim of that register I understand is to increase transparency about the level of foreign ownership of water entitlements.
The way foreign investment in housing works is that foreign investors can only invest in new buildings.
The logic behind this is that it helps to add to the number of homes available rather than competing with Australians for existing housing.
Nevertheless a lot of Australians, most Australians, think foreign investment in housing is putting the price of housing up.
There are things that we can do here.
Labor has led the fight on a lot of reforms when it comes to housing affordability – things that make it easier for people to buy their first home.
That includes changes to negative gearing, changes to capital gains tax concessions and limiting direct borrowing by self-managed super funds to purchase investment properties.
If the purpose of allowing foreign investors to invest in new property is to add to the supply and increase the number of homes available for people to live in, it’s important that there are people actually living in them.
That’s the point.
But it’s not always the case.
There are plenty of properties that are owned by foreign investors where the lights are off every night.
They are not being rented out.
So the purpose, the policy intent created by this parliament to create more stock, more homes for Australians, is being negated by the fact that people can’t live in them.
It’s something we need to fix.
In April this year we proposed a uniform vacant property tax across all major cities.
And I’m glad to see in the budget the Government followed Labor’s lead and introduced a vacant property tax on foreign investors.
The purpose being to create an incentive to make sure that Australians can get access to these new properties – that there are more homes for Australians to live in.
I note in August the Chinese State Council issued a new direction on outbound investment.
This included formal restrictions on foreign investment in real estate.
This has been done to direct foreign investment into other types of infrastructure – as well as concerns by the State Council about the flight of capital of Chinese investors.
We’ll have to wait to see what the impact of this will be on the Australian real estate market, however the Reserve Bank has already indicated that there has been a decline in Chinese investment in Australian housing.
Community concerns also get stoked when the foreign investment review processes don’t work the way they should.
We’ve seen that two years ago with the Darwin Port decision.
Same thing last year with the Ausgrid debacle when companies were bidding to buy a NSW electricity provider.
They were originally given the green light to bid by federal government agencies and then only after the NSW Government selected a preferred tenderer were they told that they were ineligible to bid.
That’s bad process.
It’s not good process when a company gets told by federal government agencies you can bid and then after they win they’re told they can’t bid.
It’s bad process.
Amateur hour stuff.
It costs companies a lot of money to bid for assets like this.
I know from my own experience in the private sector that the bidding process isn’t cheap.
The companies in question should have known a lot earlier in the process that they weren’t able to buy this asset.
Since then the government has set up the Critical Infrastructure Unit and made changes to the Foreign Investment Review Board and I’m hopeful here that bad process like we’ve seen with the Ausgrid decision won’t happen again.
Another way to address community concerns is to make sure that multinational companies pay their fair share of tax.
The fact is it’s not always the case that multinationals do pay their fair share of tax.
When we were last in government we passed laws that meant corporate tax entities with a reported total income of $100 million or more had their tax data publicly released.
That information is released in December of every year.
The last data released in December of last year revealed that 36 per cent of large companies paid no tax at all – including a number of multinationals.
There are a lot of examples of big companies that make a lot of money in Australia but pay little or no tax.
In 2012 we introduced laws to stop cross-border transfer pricing which is used by multinationals to reduce the tax they pay in Australia.
We’ve seen in a recent Federal Court decision how vital those changes to the law were in making sure that multinational companies can’t use transfer pricing to avoid their tax obligations in Australia.
We have also announced a number of other policies to increase scrutiny of tax paid by companies both here and overseas and help to make sure that they pay their fair share of tax here in Australia.
They include:
- Tightening debt-deduction loopholes used by multinational companies to reduce their tax – which should deliver an extra $4.6 billion in tax revenue over a decade.
- Requiring multinationals operating in Australia to publicly disclose in which countries they pay tax – how much and how many people they employ.
- Establishing a public register of beneficial owners of companies and trusts based in Australia.
- Requiring bidders for Government procurement contracts to disclose what countries they pay tax in; and
- Offering whistle-blowers protection and rewards for information regarding companies or individuals that evade tax.
It’s not just tax avoidance that erodes public confidence in foreign investment.
When big companies misuse the industrial relations system to cut wages and working conditions it can also have the same result.
It makes people angry, it makes people second guess foreign investment.
Unfortunately we have seen recent evidence of that with sham enterprise agreements that cut wages and working conditions.
The government has done nothing to fix this – but we will.
If we’re elected we’ll change the law to make it clear that the workers who vote on an enterprise agreement must be broadly representative of the workers who may ultimately be covered by the agreement.
We’ll also change the law so that workers and their unions can apply to the Fair Work Commission to re-negotiate sham enterprise agreements.
I welcome the Minister’s statement.
And thank him for these regular statements to the Parliament.
Presenting information to the House and through the House to the Australian people on an annual basis is an important part of addressing the community concerns that we both share.
We both agree on the importance of foreign investment.
It is critical.
It always has been and it will always be for Australia’s future.
But there is still a lot more work to do – to attract more of the investment we need and to build community support for it.
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