SENATOR THE HON PENNY WONG

LEADER OF THE OPPOSITION IN THE SENATE

SHADOW MINISTER FOR TRADE AND INVESTMENT

LABOR SENATOR FOR SOUTH AUSTRALIA

SPEECH

20 April 2016

GLOBAL FOOD FORUM – MELBOURNE

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Australia is endowed with tremendous natural resources, a well-educated and skilled workforce, a diverse and tolerant society, and a stable, democratic legal and political system.

These endowments mean there are substantial investment opportunities in Australia.

Yet the funds needed to realise these investment opportunities have always exceeded our domestic savings.

That is why growing Australia’s economy has always required supplementing our domestic savings with foreign investment.

Foreign investment can generate community concerns.

Some of these concerns reflect genuine debates about the national interest.

Some of the concerns reflect wariness about new sources of foreign investment.

Today’s debates about Chinese investment echo 1980s debates about Japanese investment which, in turn, echoed debates in the 1960s and 1970s about American investment.

Many of the concerns reflect unjustified fears fomented by shock jocks and others pushing an anti-investment political agenda.

But the prosperity of future generations of Australians will be jeopardised if we turn our backs on foreign investment.

That is why political leaders have a responsibility to encourage investment, to implement policies which ensure investment proposals are in the national interest, and to explain the benefits to the community.

BENEFITS OF FOREIGN INVESTMENT

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.

This shortfall has been filled by foreign investment.

Foreign investment allows us to invest more than we could by relying on domestic savings alone.

It means we are using the savings of other countries to finance investment in our own country.

This, in turn, allows us to enjoy higher living standards now and into the future, by financing investment which will lead to higher economic growth.

Foreign investment provides additional capital, creates new employment opportunities, supports existing jobs, and brings technology and innovation transfers.

Another way of appreciating the importance of foreign investment is to realise that it represents the amount of consumption Australians would have to forgo in order to increase domestic savings to the level required to fund our investment needs.

Last year, that amount would have been more than $2,500 for every Australian man, woman and child.

Foreign direct investment not only benefits domestic firms receiving the capital injection, it has spillover and productivity benefits for the wider economy through transfers of technology, skills and knowledge from foreign enterprises to domestic firms.

Treasury has estimated that reducing Australia’s capital inflow by 1 per cent of GDP would reduce gross national income by about half a per cent each year over a 10-year period.

AGRICULTURE AND FOOD

There are huge opportunities for Australian agriculture from the growth of our Asian neighbours.

Asia’s middle class is expected to increase more than six-fold in the next 15 years.

That will be 3.2 billion middle-class consumers – or two-thirds of the world’s middle class – in Asia by 2030.

This will translate into rising demand for goods and services like education, tourism, health and aged care, and financial and professional services – and for high quality food products.

So food exports to Asia can be a big part of Australia’s future economic opportunities.

But what is not as widely appreciated is that to realise these opportunities we will need to make significant investments in our farms, our food processing businesses and in their supply chains and infrastructure.

ANZ Bank’s 2012 Greener Pastures report found that Australia could more than double the real value of its annual agricultural exports over the next four decades.

However it warned that seizing this prize would require an estimated $1 trillion in investment by 2050 – $600 billion to boost production to meet rising demand and $400 billion to support farm turnover as ageing farmers make way for the next generation.

It is inconceivable that Australia will be able to fund this level of investment by relying on domestic savings alone.

COALITION’S APPROACH

That is why Labor opposed the Liberal-National Government’s moves to impose new barriers against foreign investment in agriculture.

The Government last year introduced a complex regime of new thresholds for Foreign Investment Review Board screening of proposed investments.

For agricultural land, the Government reduced the FIRB screening threshold to $15 million for investors from China, Korea and Japan – but not for investors from the US or New Zealand.

The new $15 million screening threshold for agricultural land will also apply where an existing foreign investor seeks to make improvements to their property.

Buying a small adjoining parcel of land, perhaps to facilitate investment in improved farm infrastructure, will trigger a FIRB review if it takes the cumulative value of the investment above $15 million.

So the new rules are not just a deterrent to new investors.

They also create disincentives for existing investors to improve or expand their operations.

The Government has also imposed a FIRB screening threshold of $55 million for investments in agribusiness.

It has defined agribusiness so broadly that it includes around half of the food product manufacturing sector – businesses from abattoirs, seafood processors, and dairy manufacturers, to fruit and vegetable processing, and cake, pastry and biscuit makers.

Adding to the complexity, if just a quarter of a business is engaged in agribusiness the whole business will be caught by the new screening threshold where there are foreign investment proposals.

These new restrictions are making Australia less attractive as an investment destination.

They make it harder for farmers and food manufacturers to raise capital.

And they put downward pressure on the values of farm assets.

Not surprisingly, they have been opposed by a range of business and farm organisations.

FANNING ANTI-INVESTMENT SENTIMENT

Another disturbing aspect of this Government’s approach has been the way it has flirted with anti-investment “selling off the farm” rhetoric.

The Deputy Prime Minister and Agriculture Minister, Barnaby Joyce, has said: “We need to think much more carefully about how much of our country we sell off for short-term dollars and what we might be losing over the longer term.”

Mr Joyce has also said that the government has to prove to the Australian people that “you control the show.”

Little wonder his colleague, the Minister for Tourism, Senator Richard Colbeck, expressed concern about the rhetoric around the sale of Van Diemen’s Land Company to Chinese interests.

Senator Colbeck said: “Sending negative messages based on what can only be described as xenophobia really does concern me.”

I hope he has raised these concerns with Mr Joyce.

FOREIGN INVESTMENT IN AGRICULTURE IS LOW

The fact is that foreign investment in Australian agriculture is low.

Agriculture accounted for just 0.2 per cent of all foreign direct investment in Australia at the end of 2014 – $1.3 billion out of a total stock of $688 billion in FDI.

By comparison, mining accounted for 38.5 per cent of the stock of FDI and manufacturing accounted for 12.8 per cent.

The Australian Bureau of Statistics’ Agricultural Land and Water Ownership Survey (ALWOS) showed that 99 per cent of Australian farm businesses were fully Australian owned in 2013.

The survey showed 88 per cent of farm land by area was fully Australian owned and a further 5 per cent was majority Australian owned.

In contrast, foreign ownership of Australian financial corporations is nearly 55 per cent and foreign ownership of non-financial corporations is just over 40 per cent.

But some people are so addicted to scare campaigns that they have attacked the statistical messengers.

When the ALWOS survey showed how low foreign ownership was in agriculture, Coalition backbenchers complained that it must be wrong – and recommended that the ABS stop carrying out surveys on foreign investment in agriculture.

It has now also emerged that the Government is breaking its promise to establish a public register of foreign ownership of agricultural land.

Last year, Mr Joyce said the register 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 Mr Joyce has changed his tune, saying that only aggregated data from the new register will be made public.

FOREIGN INVESTMENT IN FARM LAND

Let me address some of the issues that are raised around foreign investment in agricultural land.

Our arable land is indeed one of Australia’s most important natural resources and it gives our economy a significant comparative advantage.

But foreign ownership in no way diminishes the quantity or quality of our land.

As the former Minister for Trade and Investment, Andrew Robb, was wont to say: foreign investors can’t take the land overseas.

In fact, foreign investors have the same economic incentives as local investors – incentives to work the land, to invest in new equipment and technology, to adopt new farm production techniques and to undertake R&D, so they can produce high-quality Australian food products for domestic and world markets.

Foreign-owned farms generate economic benefits for the wider community just like domestically-owned farms.

Foreign-owned farms create local jobs, purchase equipment, fuels, fertiliser and other inputs from local suppliers and rely on local transport operators to get their products to market.

I’ve heard people say foreign ownership of agricultural land compromises Australia’s sovereignty.

This confuses ownership and sovereignty.

Australian governments retain the same powers to regulate foreign-owned farms as they do for locally-owned farms.

Foreign investors must comply with Australian laws – the same land use regulations, the same animal welfare, environmental, and water management rules, and the same business and employment laws.

Some people say foreign investment in agricultural land would be more acceptable in the form of debt or portfolio equity investment than in the form of direct ownership.

There are a couple of problems with this argument.

Foreign direct investment brings not only capital, but also technology transfer, new management techniques and access to global supply chains – these benefits do not come with investment financed by debt.

FDI is also more stable – it is a less volatile and more “patient” form of capital than portfolio debt or equities investments.

This means FDI is more compatible with a long-term strategic approach – which is the kind of approach Australian agriculture needs to realise the opportunities over coming decades.

Ownership gives investors a more substantial stake in the long-term success of the local business and, indeed, a more substantial stake in the welfare of the wider Australian economy and community.

Discouraging foreign ownership would force our agriculture sector to rely more heavily on debt and would increase the cost of capital for the sector.

I’ve also heard people say that foreign investment in our farms will jeopardise Australia’s domestic food security.

This is, frankly, a pretty far-fetched proposition.

Australia already produces far more food than it consumes.

Our farmers grow enough food to feed around 60 million people and export more than half of their production.

At the same time, more than 90 per cent of the fresh produce sold in Australian stores is locally produced.

There is no credible evidence that Australia faces a food security crisis due to foreign investment in agriculture.

What we do face is a shortage of the domestic capital we need to expand our agricultural sector so it can take advantage of future opportunities – opportunities that will deliver economic benefits both to our farmers and to the wider Australian community.

Labor supports trade and investment between Australia and the rest of the world because it drives economic growth and creates jobs.

As the Australian economy transitions out of the mining boom we need to find alternative sources of growth and jobs.

Boosting and diversifying our export performance will be an important part of this transition.

Trade agreements can help by opening up new markets for Australian exports.

But we also need to attract investment so we can build the production capacity needed to meet export demand.

Australia remains attractive as a destination for foreign investment.

But with the end of the mining boom and with the Abbott-Turnbull Government decisions to erect new barriers to inward investment we cannot afford to be complacent.

Our ranking in an international survey of investor confidence has slipped in each of the last two years.

A.T. Kearney surveys senior executives of major international corporations – it uses the results to create a ranking of the top 25 markets based on how political, economic and regulatory changes will affect FDI inflows in coming years.

Australia has slipped on this FDI Confidence Index from sixth place in 2013, to eighth place in 2014 to 10th place in 2015.

Agriculture and food production can be as important for Australia’s future as they have been for its past – but only if we maintain a dynamic, competitive and open economy.

That is why we cannot afford to bring down the shutters on foreign investment.