Rowan Ramsey (Grey, Liberal Party) Share this | Hansard source

I rise to speak on the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 and the other bills associated with it. There are four important points here that we need to consider. First of all, modern societies need rules, but they must not be too onerous and they must be enforced and have significant consequences if individuals or entities choose to break them. The fourth point is that the people of Australia must have an inherent trust in the system, whatever that system is, whatever arm of government it is and whatever it refers to. The people have to have an open and clear understanding of what the policies of government are and how they work, and they must trust them.

I would like to expand on that just a little. First of all, we need rules. A lot of us do not like rules, but otherwise we would be driving all over the road. Otherwise we would be using substandard products. Otherwise our children would not have a standard education. Of course we need rules. We know we need rules, but they must not be too onerous. If rules are too onerous, either they inhibit investment and freedom or they are totally ignored, and a rule that is totally ignored is the most useless rule of all. There must be consequences. Most of our rules, in Australia, work on an honesty system. If we compare foreign investment rules to the taxation system, the taxation system in Australia relies on people putting in their personal return honestly, answering the questions honestly, and then paying their honest amount of tax. I cannot guarantee that everyone in Australia does that; in fact, I have a fair idea that there might be a couple who do not! But the reason most people lodge an honest taxation return is that they have some real fear that, somewhere along the line, they will be audited and, if they are found to be cheating on the system, they will be gone through like a packet of Epsom salts. That is a good system. It is the cheapest way to run the system. And so it is with all forms of foreign investment in Australia. We rely on the individuals—on the entities—to be honest. But there must be a reasonable chance of them actually getting caught and paying the consequences. If they are caught, those consequences need to be significant, because if they are not significant then the individual or the entity will do whatever they like and just thumb their nose and wear the slap on the wrist, as it were. For instance, we have rules around Australian standards, and I was speaking to one of the ministers' representatives only the other day about the importation of substandard products. Somewhere down the line someone has to sign a form to say, 'These imported goods are up to Australian design standards,' and there should be consequences if they have misled the customer. Just as with that system, so there should be—in the issue of foreign investment in Australia—serious consequences when someone gets caught.

Most importantly, at the end of the day we must have a system that has trust, because, in the end, if the public does not trust the system, it is destined for failure and it will be destroyed. If the public does not trust the system of—to use that analogy again—importing building products, if they are not up to standard, then eventually the outcry will mean that they will demand change. That system will not survive and there will be collateral damage along the way. That is why you need a system that is open and transparent and that the public trusts. That is what we are doing with this legislation and that is what the government is doing. It is not introducing reams of new restrictions. There are few alterations, but, by and large, they are enforcing the perfectly fair system that we already have.

This is brought to light mainly by the thriving—or should I say booming—Sydney house market. House markets are wondrous things. They can be driven by lots of things. The questions are: is the Sydney house market a bubble, and is it driven by negative gearing? There are many pundits out there who say that if we did not have negative gearing we would not have this bubble, or this boom, in the Sydney house market. I do not want to speak on the merits and demerits of negative gearing today, but the great question is: if you do not allow a full tax-deduction for investment in housing that then makes it a significantly different investment to everything else we invest in, in a business sense—like if we want to expand our chemist shop or our farm then, of course, the borrowings we take to do that will be a full tax-deduction—so why would you make housing different? But I do digress, because I am going off into negative gearing.

To come back to the Sydney housing market, one of the other factors of course is land availability. We know, when we look at these houses worth $1½ million, $2 million or $3 million, that if you knocked down the houses and replaced them they would be lucky to be worth $300,000 or $400,000. It is not the house—it is the land.

There are all kinds of reasons for restricting urban sprawl. Some of them are very good, and some of them are driven by state governments; some are driven by city councils, who want work out a way to harvest the uplifting prices, so they can put it back on their slate, if you like. And of course, land prices, or housing prices, can be driven by overenthusiastic bankers. They could also be driven by foreign investment—other people coming in and buying into those markets—or maybe those booming Sydney house prices are driven a little bit by all of those things and maybe not by any one in particular.

We do have rules in the case of foreign investment in the housing market, but, in reality, we find that they have been largely ignored. They are quite good rules with quite good reasons, but they have been ignored—either by disguising the identity of the real purchaser by using third parties, or even by not registering the sale. We have these rules, but as I said before, it is absolutely pointless if we do not enforce them, because they will be ignored. That is where we have got to in that issue.

This legislation—this cluster of bills—moves responsibility for the monitoring of foreign purchases to the Australian Taxation Office. They are a very sophisticated organisation. They have better systems for linking data and screening purchases, so they will have a much higher chance of identifying breaches of the rules that we already have in place. That will, in turn, enhance the public's confidence in the system and will underwrite the fact that we have a good level of investment in Australia—the right level—coming from the right places with the right controls on it. The increasing penalties will apply to that.

There is a partial amnesty on these land ownership issues, until 30 November, because as a government we want people to come forward and self-identify and say, 'Well look, yes, I really did do the wrong thing, but, now it has been pointed out to me in the nicest possible manner, I am willing to come forward and either divest that property or meet the regulations that surround it.' So that is where we are now in the housing market.

I will now turn to agriculture. Mr Deputy Speaker Goodenough, you would know that I would be vitally interested in agriculture, because that is the kind of electorate I come from and that is the kind of business I used to be involved in. There is a lot of hyperbole around foreign investment in agricultural land but, at its heart, there are genuine questions about its cause and effect on Australia and the lack of clear understanding of its quantum and range. There is a history here. I understand that, historically, the biggest investor in Australian agricultural land is the United States, followed by the United Kingdom. There is a long history in Australia of this type of investment, and there is no real evidence of bad outcomes as a result of that foreign investment in Australia.

One of the topics that I am quite keen to bring up when I am talking about this subject—one that you are probably aware of, Mr Deputy Speaker Goodenough, coming from Western Australia—is the Esperance Land Agreement Act, which was signed in, I think, the 1960s. It facilitated the importation of a lot of American money. American companies came in and cleared the country around Esperance and developed the farming properties there. At a later stage a lot of those properties were bought by the insurance industry. Interestingly, after some time, the insurance industry, decided that it was not so easy to make a buck out of agriculture in Australia and said, 'It's not such a great investment; we'll sell them off.' The result, of course, was that Australian farmers got really well-developed properties cheap. As far as I know, most of the land in that part of the world is now privately owned, mainly by families, and is very productive. It was a great outcome, and it would not have happened without foreign investment.

I have a friend in the south-east of South Australia. They have a property there where they run cattle. They wanted to invest in a 1,000 cow self-milking dairy, and the only people who were keen to bankroll it were Malaysian interests. They wanted all the milk—but, at the moment, it does not produce any milk. The owners of this land estimate that it would have led to five times the income coming off this certain amount of land. It has not happened at this stage, but the point is that it is pretty hard to be critical of that kind of foreign investment because, at the end of the day, if they pay too much and it is not a viable option, we will end up with a cheap asset here in Australia.

The questions that people raise around foreign investment in agricultural land seem to revolve around the strength of our transfer pricing policy and the Australian Taxation Office. If in fact they are using Australian inputs and Australian labour, which they are required to do under our regulations—and operating under our system of chemical application and the things to do to care for the land—and they are paying the correct amount of tax at the free on board stage, it is no different to anybody else owning that property.

But the government has listened to the people, because we know there is a lot of unease out there, and we have heard their concerns. I spoke earlier about how important it is in this area that people trust the regulations that are in place, that they trust the government and that they trust the system to look after them. Firstly, we are in the stage of developing a national register of foreign owned land—because, how does anyone make intelligent decisions about these issues if they are in an information vacuum? We cannot have a conversation without the facts. The register is essential, and we are working with state governments at the moment to bring that up to speed.

Secondly, the threshold for the Foreign Investment Review Board to look at the purchase of agricultural land has been reduced $252 million to $15 million, and it is cumulative. So, if an entity buys a $7 million farm and another $7 million farm and another $7 million after that, the tick goes off and the Foreign Investment Review Board will have a look at it. That does not mean to say that they will not be allowed to buy it; it just means that the Foreign Investment Review Board will ascertain whether the purchase is in Australia's interest or against Australia's interests. I think that is an important move. We can talk about the values, but there has only been one agricultural property ever sold in Australia for more than $252 million. So, if you are going to leave it at that figure, you may as well not have it at all. We have decided that we will reduce it, because people are concerned. As I said, if people are concerned and they question the system, eventually that mistrust builds up and it is likely to fail. So it is important that we give people that assurance.

The third thing is the $55 million threshold on the purchase of agribusinesses. I often say to people that I think the loss of control of agribusiness is actually a more dangerous thing for Australia than the loss of land, because in the end they cannot take our land back overseas. I will use as an example a product that used to be made in Australia but is no longer made in Australia—Blundstone boots. You can still buy them. They still look the same. They are still an Aussie product but they are not made here. The labels have been bought and they are made overseas. That IP is able to be shifted. So I think it is a little different. It is right that the FIRB should have a look at this industry. I think these bills are good value and I support them. (Time expired)

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