Gary Gray (Brand, Australian Labor Party, Shadow Minister for Resources) Share this | Hansard source

The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 is indeed an important bill and an important initiative of the government. I can recall when I was studying economics last century reading the observations from the venerable British economist Joan Robinson:

The misery of being exploited by capitalists is nothing compared to the misery of not being exploited all.

I thought about Joan Robinson's comments the other day when Shell announced its $70 billion bid for the BG Group, which in turn had me thinking about a few other things in my own past, when I worked for Woodside Energy in the defence of Woodside against that Shell bid.

Fourteen years ago then Treasurer Peter Costello rejected Royal Dutch Shell's bid to take over Woodside, which was then and remains the operator of Australia's largest resources project for the North West Shelf in Western Australia. Woodside did not like being caught in the great eye of Royal Dutch Shell, and Peter Costello believed that Shell's acquisition of Woodside would not be in the national interest, because Shell would control, determine and sequence the development of Australia's liquefied natural gas industry in its interests alone. At the time, the Treasurer said he could not be sure that Shell would promote exports from the North West Shelf in preference to its competing projects elsewhere. In 2001 the North West Shelf was Australia's only liquefied natural gas LNG project, exporting about $7.5 million tonnes of LNG a year to Japan. Today, Australia has four operating LNG projects, six under construction, and expects to be producing about 80 million tonnes a year by 2018, to be the world's largest exporter of LNG. That would be a tenfold increase in LNG exports over what Australia produced in 2001.

By any measure, Peter Costello's decision served our nation's interest well. It was in, many ways, a landmark decision. It was quite counterintuitive for a pro-market Liberal government to make a decision to constrain a foreign investor's takeover activity in Australia. I guess that goes to the nature of intelligent government decision making and good frameworks for decision making, in that Treasurer Costello was able to make such a bold decision in the national interest.

I have already declared my interest, in that I was an employee of Woodside at the time. I was a vociferous and active campaigner to keep Woodside in Australian control and not to allow the takeover by Royal Dutch Shell. I can well recall a conversation with former Treasurer Costello in which I assured him that, if the government made the decision to allow the sale of Woodside to Shell, we would go quietly and, if he made the decision to allow Woodside to continue as an independent company, we would make him proud. On the basis of that argument alone, I felt very comfortable indeed that whatever decision the former Treasurer would make he would make in the national interest. I think by any reasonable level of conclusion—you can look at this through whatever lens you like, whether it be total dollars of export income earned, level of employment, level of skill, Indigenous employment and Indigenous benefit, regional development or royalties to state governments and local communities—this decision was the very cornerstone of an insightful growth in the LNG industry.

Ironically, Shell has learnt a trick or two in the intervening 14 years and is now set to achieve what Peter Costello denied it 14 years ago. It is seeking a dominant position in Australian and global LNG supply. We thought then that such dominance was not good, and I argued that as I worked for Woodside. The new combined BG-Shell companies—should Shell be successful in its current takeover bid of BG—will produce more than the world's next biggest LNG player, Catagas, which is a government-owned entity, and will produce more than double the next global publicly listed LNG player, Total, in France. Under the deal, Shell's annual deliveries of LNG will rise from around 34 million tonnes a year to 45 million tonnes, which is around 20 per cent of current global LNG demand.

Among the jewels that Shell will get in this takeover bid are Australia's first east coast LNG project, in Queensland, on Curtis Island at Gladstone, which BG Group built and began operating in 2014. It is amongst the world's lowest cost new LNG plants and it is the first LNG-from-coal-seam-gas plant in the world. This is a good decision that Shell has made. I believe it will be a good decision and in Australia's interests for this transaction to be completed and to be completed forthwith. It is possible to see that, through the Shell takeover of BG, not only is a greater alliance created for the Arrow gas reserves but, importantly, a global player is brought into our east coast LNG export industry, with substantial domestic assets that allow the growth of a whole new business.

I reflected, when I came to the conclusion that the Shell takeover of BG was, in fact, very strongly in our national interest, on how arguments change and how the cycle changes and how the foreign investment review process allows for intelligent, iterative government decision making in our national interest. You see, Australia, as a growing nation, has always been an importer of capital, whether it be to grow our wool industry, our beef industry, our iron ore industry or our tin or copper industry. We have relied upon foreign investment. Our oil industry, our gas industry and our LNG production that I referred to all rely on massive amounts of foreign investment. The cities of Mount Isa and Broken Hill, the communities of the Pilbara, Mount Tom Price, Mount Newman and Kalgoorlie all rely, for their very existence, on foreign investment. So how we manage our foreign investment is critically important.

Trade and investment are effectively two sides of the same coin. To take advantage of new markets around the world, we need to support new production at home, and to support production we need investment. Increasingly, in the scale of the investment that we need, we need foreign investment. Foreign investment has therefore, through that virtuous cycle, been critical to Australia's growth and it is critical to our future prosperity. I guess that is why the National Farmers' Federation has estimated that, for Australian agriculture to reach the capacity needed to meet rising demand, it will require investment of between $1.2 trillion and $1.5 trillion over the next three decades. That is equivalent to our current gross domestic product over the course of the next three decades. That investment will substantially come from overseas. The former government, led by Mr Abbott, had what can only be described as a retrograde approach to foreign investment in agriculture. It imposed new barriers to foreign investment in agriculture and in agribusiness. I do not believe that those barriers can serve our interests as a nation well. It introduced a complex regime of differential and discriminatory thresholds for Foreign Investment Review Board screening of proposed investments, with no economic or foreign policy rationale—just a tawdry domestic political rationale. The government has reduced the investment screening thresholds for agricultural land to $15 million for investors from China, Korea and Japan, but not for investors from Singapore and Thailand, who enjoy a $50 million threshold. That seems to make no sense—$15 million for China, Korea and Japan and $50 million for Singapore and Thailand, while the United States, New Zealand and Chile enjoy a threshold of over $1 billion.

I take a very liberal attitude to foreign investment. I embrace it. I support it. I accept that not only my living standard but the living standard of my children is deeply reliant on a deep and steady flow of foreign investment. These difficult and discriminatory thresholds present not just a barrier to business but a confusion. Part of that confusion allows business models to be built around Foreign Investment Review Board approvals that cause, in and of themselves, substantial confusion too, as the investment lawyers get themselves involved in providing advice both to FIRB and about FIRB back to investing companies.

For any company that might be looking at this speech and the words that I am speaking now in the context of the Foreign Investment Review Board, my simplest and clearest advice is that investors should engage directly with the Foreign Investment Review Board and not indirectly through lawyers or third parties and intermediaries. You will find the Foreign Investment Review Board is staffed by highly competent people, making judgements and capable of understanding economic arguments in a most profound way. It is a group of public servants and advisers who have advised successive governments on the most difficult sets of decisions, and on very few occasions has it concluded to recommend against an investment. So the FIRB is not something that should be feared by investors. It is in fact an entity that should be embraced, engaged, informed and supported in all of the consideration of investment by overseas investors in Australia.

But I say again that the discriminatory thresholds that had been introduced in the course of the last few years make a mockery of the very good instrument that we have in the Foreign Investment Review Board. In this year's budget, the government announced $735 million in new application fees for foreign investors. I think this is a terrific idea. It is a good idea to make that charge. It is a good idea to make that charge on the entities that will be using the Foreign Investment Review Board, and it is the right way to go about placing that charge on such investors.

It is no surprise, of course, that I, with my background, would complain about the discriminatory thresholds and barriers. That complaint has been voiced on many occasions by the Business Council, the Food and Grocery Council and a number of other entities, from the Queensland Farmers Federation to the Chamber of Commerce and Industry of Western Australia. But we can as a nation take a lot of pride in how our Foreign Investment Review Board operates and the decisions that it makes. Not just on balance but on each and every occasion that we have needed the FIRB to step up and put in place a good and thoughtful decision, it has been capable of doing that—with the exception, I would say, of a decision made not so long ago in the context of Archer Daniels Midland and their bid for GrainCorp, a bid which those of us on my side of the House, from the public information that was available to us, were broadly supportive of but which ultimately, for reasons that I cannot fathom, was blocked by Treasurer Hockey. It was the first major US based foreign investment to have been blocked. It was in the agriculture sector. It was an important decision which the government made and which I do not believe has been properly explained. I believe that, in order for us to maintain investment at the level that we need it to be maintained at in our grain infrastructure on both coasts—and most knowledge that I carry is of the west coast; I do not claim to be knowledgeable at all about the east coast, but I do want to place on record my personal confusion at that decision by the Treasurer—in the context of the capacity to make profound and generationally significant decisions, a better decision was available to us—one that would have been more transparent and more clearly supporting foreign investment in our agriculture businesses and importantly, in that context, in the areas of logistics and of getting our product into markets.

Having said that, I support this bill and I look forward to watching its passage through both houses.

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