Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

Thank you, Mr Speaker. This is demonstrated by the fact that, between 1999 and 2008, an average of 76.4 per cent of foreign investment proposals were changed to meet certain conditions in order to be approved. The most recent figures show that the FIRB approved 7,841 proposals in 2007-08, which was a 27 per cent increase on the previous year. Those approvals involved proposed investment of over $191 billion, a 23 per cent increase on the previous year. The mining sector led the charge, with $64.3 billion worth of projects approved in 2007-08, followed by $45.5 billion for real estate, $35.7 billion for services and $31.3 billion for manufacturing. The United States is the leading foreign investor in Australia—and was in 2007-08, with $49.5 billion worth of proposals approved. That is 26 per cent of the total amount in that year, which is a very important point. The United Kingdom, Germany, Singapore and Switzerland were also regarded as major investors in the 2007-08 year. There has been a steady increase in the value of foreign investment over the past decade. There were nearly 45,000 proposals for foreign investment in Australia worth $1 trillion between 1999 and 2007, so this illustrates the magnitude and significance of foreign investment in this country.

As I said earlier, this bill contains no changes to the national interest test, and this is very important. As a matter of interest, in fact there is no specific definition of ‘the national interest’ in the act or in this bill. The government determines what is:

‘contrary to the national interest’ by having regard to the widely held community concerns of Australians.

In practice, this usually refers to existing government policy and legislation, national security interest or economic development. For example, the Treasurer refused to approve the China Minmetals Corporation non-ferrous metals takeover of OZ Minerals in April until it removed the Prominent Hill mine from the deal. Prominent Hill is a prohibited area for the purposes of the ‘testing of war materials’ and contains places classified under the Aboriginal Heritage Act. It is located within the Woomera Prohibited Area, and the Treasurer said it would not be approved, on national security grounds. The coalition strongly believes foreign investment is overall in Australia’s national interest. We believe that foreign investment has a positive impact on Australia and always has. We support foreign investment but we are always mindful that there must be full and open transparency when it comes to foreign investment.

One recent example of this was the amendment to the Guarantee of State And Territory Borrowing Appropriation Bill 2009 which I moved successfully on 18 June. The amendment recognised that government debt is a massive looming issue for this nation under the Labor Party. More than 65 per cent of government borrowings are in fact coming from overseas. So not only do we have a government that is engaging in the biggest borrowing program in modern Australian history but 65 per cent of the money they are borrowing is coming from overseas. The amendment that I moved to the act ensures that the government publishes the registered beneficial owners of Australian government bonds. Australians have a right to know who is lending us all this money. Ultimately, just as anyone who has a mortgage needs to know who they owe the money to, because inevitably the bank has some influence over the way we go about our daily lives, so too should Australians know who they owe money to. The government at first completely resisted this transparency. You did not have to worry about that under the coalition because we were not borrowing money on that scale. In fact, we left the Australian government with no net debt, so we did not have to worry who we borrowed money from, because we did not owe anything. We had more money than they were lending to us. But, hang on—along comes Labor and borrows record levels of money. And of course we want to know who is lending us that money.

It is widely recognised that the biggest investor in the world at the moment is the Chinese government. Therefore, if the Chinese government invests in Australia the Australian people should know. As this act illustrates, if you have large-scale investment by a private sector organisation or a foreign government and they are buying into equities, real estate or Australian assets, the Australian people should know, and the Australian people should know who is lending us the money. It is quite an interesting challenge for the nation to have a massive investor going forward. As I pointed out, companies and individuals from the United States were the largest foreign investors in Australia in 2007-08. That may have shifted somewhat in the last 12 months; we will wait and see. But we want to know that there is a transparent process for identifying if someone is investing in equities or in real estate, and that is addressed under this act. Then the question is: who is investing in Australian government debt? That is addressed by the amendment that I moved to the Guarantee of State And Territory Borrowing Appropriation Bill 2009. I might add that that bill passed and was proclaimed earlier this year.

So far we have seen no registry, so I am putting the government and the authorities on notice that they now have a legal obligation to publish the full registry of those people who are lending the Australian government so much money. I want them to deliver on that registry and if they do not then they will be in breach of the law that they helped to pass. This is a significant challenge for the nation, and just as we need to know if individuals or corporations are investing so too we need to know whether it is a foreign government that is investing.

In order to protect our national interest, this bill broadens four key definitions in the act: substantial interest, aggregate substantial interest, voting power and potential voting power. ‘Substantial interest’ is currently defined as 15 per cent or more of the voting power or of the issued shares. This bill changes this definition to holding at least 15 per cent or one or more of voting power, potential voting power, issued shares or rights to issued shares. The current meaning of ‘aggregate substantial interest’ is 40 per cent or more of the voting power or the issued shares. This bill extends it in a similar vein to two or more persons taken together holding at least 40 per cent of the voting power, potential voting power, issued shares or rights to issued shares. ‘Voting power’ is currently defined as the maximum number of votes that can be cast at a general meeting. It has been clarified to explicitly include potential voting power. ‘Potential voting power’ refers to the number of votes that could be cast if it is assumed that a future right is exercised. Currently there is compulsory notification for proposals involving the acquisition of ‘substantial shareholding’. This bill will replace the word ‘shareholding’ with the word ‘interest’.

As I said earlier, financial arrangements and company structures have become increasingly complex. People have sought to use more exotic mechanisms to try and avoid proper and full disclosure of not only their equitable interests in the company but also their voting interests and influence in the company. There are numerous examples. One example this bill will cover is debt-for-equity swaps. When a company needs to restructure its finances it can issue a debt-for-equity swap and debt is exchanged for a designated amount of stock. In effect, an investor buys the debt in return for a certain number of shares or capital in the company. Another example is derivative instruments. An option on a share would give an investor the right, but not the obligation, to purchase a share at some point in the future for a specified price. If that future potential share purchase were large enough to represent a substantial interest then it would need to be reported under the requirements of this bill.

At the moment, the act does not properly cover these kinds of investments. That is why the coalition is supporting this bill. The bill broadens the definition of what has to be reported to the government and incorporates, as outlined earlier, potential control. The investor in a debt-for-equity swap could potentially gain a controlling share in the company if it later swaps the debt for equity.

This bill clarifies Australia’s foreign investment regulations. It will apply retrospectively from 12 February 2009. A transitional period will apply from 12 February 2009 to the date of royal assent to ensure that foreign investors are not adversely affected by the start date. During the transitional period, there will be no criminal penalties, and retrospective criminal prosecution is expressly excluded. The transitional arrangements provide that foreign investors will have 30 days to notify the Treasurer if an investment is covered by this bill.

Foreign investment, of course, is vital to Australia’s future growth and prosperity because it creates jobs and promotes healthy competition in our industries. This bill supports investment in this country while safeguarding our national interest. For the benefit of the people in the gallery, I would say that this is another example where the opposition and the government work together to deliver a bill in the national interest. Quite obviously, this is not going to make television news tonight. I find that hard to believe, Mr Speaker, notwithstanding your presence in the chamber—but this happens on numerous occasions and I am sorry that Australians are not aware of it. We can come to an agreement on something that is in the national interest. We often do. It is just not reported, and so often the coverage is restricted to a slightly frayed temper during question time or the humorous quip from the Speaker. On that note, I commend the bill to the House and reaffirm the commitment of the coalition to support this legislation.

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