David Gillespie (Lyne, National Party) Share this | Hansard source

I rise to speak about this cluster of bills, the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 and the Register of Foreign Ownership of Agricultural Land Bill 2015. These bills are putting into effect policies that the Nationals took to the country at the last election, and I am very pleased to see that we are delivering on our promises. They strengthen the integrity and management of foreign investment in agricultural land and agribusiness but have just as much relevance to the residential real estate market, and I will make some comments about that later.

Ever since Australia started off as an outpost of the British foreign office and was a dumping ground for the poor, the unwanted and lots of convicts, commerce has developed on the back of foreign capital. We do not have 1,000 years of wealth stored in the nation like European nations do that have huge stores of investor capital. We are not America with huge reserves of accumulated wealth from another couple of hundred years economic activity and 350 million people. In essence, we need capital invested in this country and Australia cannot provide it all. I would like to see Australian superannuation funds a bit more active in this agricultural land and agribusiness space, but that is another matter and I am digressing.

Essentially, we welcome foreign investment. But any nation that does not control, supervise and regulate—any system, whether it is foreign investment in residential real estate, agricultural land or agribusiness—is derelict in its duty. People want us to supervise these marketplaces because there are phenomena around the world that are having unintended consequences.

The register of all foreign land acquisitions that have an accumulative value over $15 million is a significant manoeuvre but is quite mild when you put it into the context of other countries. Just over the ditch, our cousins in New Zealand have very strict rules about foreign purchases of agricultural land. In fact, it is almost impossible. In many states of the United States it is not possible at all. Similarly, Japan, Korea and China—one of our biggest trading partners—have much stricter rules, in this regard, than we do. So we are being very generous and very business minded and employment minded and jobs minded by encouraging foreign capital into this country. That is what happens when you get investment in a country. You get business growth, you get employment growth and you get jobs out of employment. For those in this chamber who are obsessed with magic pudding economics, we cannot rely on grants from government to create jobs. We need businesses to create jobs. Businesses have to be capitalised. That is why I say at the outset that foreign capital is so important for this country.

This legislation will also require review by the Foreign Investment Review Board of foreign purchases of agribusinesses that reach the threshold of $55 million. That is also a very prudent manoeuvre because these purchases should go ahead if they are in the national interest. But, as you can appreciate, many of the agribusinesses have grown out of cooperatives or processing plants in geographically dispersed areas which control the market for whatever is being processed. Originally they were set up as cooperatives and they have been either commercialised or sold off. When someone purchases that processing plant, they are able to have the market by the short and curlies. It is a no-brainer. We have to make sure this is to the benefit of the people who are providing the raw product to that plant and that they are not going to be done over with a 'take it or leave it' price control mechanism because the value of the commodity depends on the price that one purchaser offers. If you have got dry goods or things that can be stored, transported around the country and sold at various times, it will be happy days—you can cherry pick the market at the best price. But if you have got a primary product that has to be sold because it is going to start rotting and there is only one processing plant in your area your market is one—whether it is milk or cane. Things like that are really important. When the Foreign Investment Review Board looks at these potential purchases they have to realise that. Sometimes I think people do not really appreciate what the market is. I am really pleased that this review process is underway. It is not stopping foreign investment but we have to analyse its pros and cons of the Australian community.

The bill that is being amended here was set up in 1975. It is timely that we do have stronger regulations. There will be civil penalties if the regulations are broken. Some of the measures brought in in 1975 are in effect sound principles but they have not been applied, or they have not been regulated, and they have been discreetly avoided by some of the purchasers. Penalty fees of $90,000 or $135,000 or divestment orders will really change behaviour in the market—whether it is residential land, agribusiness purchases or whatever.

In a lot of these purchases, particularly in residential real estate, third parties are allowing people other than themselves to skirt the regulations. In this legislation there will be fines and penalties for third parties who are breaching the regulations. There will be increased application fees for all these purchases. At the moment, the FIRB has a minimal budget. We do not want the cost of regulating all these foreign purchases to come out of general revenue that is meant to fund hospitals or roads. These fees that are being charged will give quite a significant income to the government to run this process—a net positive to the government of about $620 million—so it is not going to cause any disruption to the general revenue. The definition of 'substantial interest threshold' is also addressed in this legislation. It brings it into line with other existing commercial related legislation. That threshold is being raised from 15 per cent to 20 per cent. If you control more than 15 per cent of the body that is purchasing the land or the agribusiness, it triggers the review in the regulations.

I would like to digress and talk a bit about what is happening in the residential real estate market. As you can appreciate, China has huge amounts of capital and wealth that has been created as the Chinese Republic has paradoxically adopted the practice of state controlled capitalism. There is a huge flight of capital out of China to many cities around the globe. That has been to gateway cities such as San Francisco, Vancouver, Auckland, Melbourne, Sydney and even Perth. There has been a lot of talk in the financial and real estate press about whether there has been a bubble happening in Australia. The reason for saying there was not a bubble is that they have looked at the borrowings, at what the banks are giving out in loans.

When those comments were made about 12 months ago, there were not any figures on the borrowings funding real estate that would trigger that comment. But what lies behind those figures, manifesting itself through the supply and demand principles of everything economic, is that there is a lot of non-borrowed capital going into the residential real estate market. And it is not just super funds investing in commercial or residential real estate; there is a lot of foreign capital being invested in it. The Chinese property bubble is suddenly being deflated and there is all this capital going around the world. It is being put into the big cities of the world—London, San Francisco and New York. Some of that capital is coming here. So we have a lot of pent-up demand.

That is why these regulations are so important—because, if people are skirting the regulations and using third parties to park their capital here and we do not know about it, we should know about it and analyse it. If residents of Australia who are foreigners are purchasing property but then renting it out, that is breaking the regulations. The intent of the system is that they have a home while they live here for four or five years. If they leave the country but then do not sell the property, they will be breaking the regulations and these penalties will kick in. When you have $6 billion of non-borrowed money landing in Sydney, Melbourne and the other capital cities' residential markets from this flight of capital out of China—and other places, too—it inevitably puts a huge pent-up demand into the system. Unless we have an adequate supply of residential real estate, prices go up.

The other thing I should say is that, if some of that $6 billion can come here and build lots of houses and apartments so that we have a greater supply, it will make housing more affordable, particularly for first entrants into the market. How this capital is used is what is important. We do not want to have a bubble happening in our cities and then have everyone end up in tears a couple of years down the track, when the bubble bursts. We want sensible economic principles to apply. We love foreign capital to be invested to build new factories and homes, develop underdeveloped farms and increase production. That is great, but, if people are just using this as a piggy bank to park their money till they move it somewhere else, and our whole property market goes kaput later on, that will not be helping anyone, particularly if a lot of Australians borrow heavily on the values that residential real estate has now and then the market collapses. In Hong Kong years ago, there were plenty of people who did just that. Their property markets collapsed and their borrowings were greater than the value of the property. That is not a happy situation for anyone.

There is lots of good stuff in this legislation. As I said, it responds to the needs and demands of Australians, who want to know who owns our agricultural land. We want agribusiness thriving in this country. We want it well capitalised, but we do not want purchases that will be to the detriment of Australians. So I think that reviewing the process before it goes ahead is only sensible. I commend this bill to the House.

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