Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I rise to speak on the government's package of bills dealing with Australia's foreign investment framework. This is a package of three 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 modernise the legislative framework that underpins Australia's foreign investment regime. That is a framework laid out in the Foreign Acquisitions and Takeovers Act 1975. The Foreign Acquisitions and Takeovers Act regulates foreign investment and provides the basis for investments to be assessed to ensure they are not contrary to Australia's national interests.

The first of the bills before the Senate, the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, which I will describe as the amendment bill, makes extensive amendments to this act. Most of these amendments modernise the act to ensure it reflects contemporary practice and provides a clear framework for regulating foreign investment. The opposition supports these aspects of the amendment bill because they will provide greater certainty around the operation of Australia's foreign investment regulations and policies. However, the bill also implements government policies that Labor opposes, because they would impose layers of red tape on proposed investments in Australia's agricultural, agribusiness and food-manufacturing industries. Labor will seek to amend these aspects of the amendment bill to ensure Australia remains an attractive destination for the investment we need to build our economy. First, let me deal, briefly, with the other two bills in this package.

The Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 imposes fees on investors lodging applications with the Foreign Investment Review Board. The government's rationale for imposing substantial new application fees on investors is cost recovery. The opposition will support the fees imposition bill; however, we do wish to point out that the imposition of these fees does increase the costs of investing in Australia. Foreign investors and their Australian business partners already face substantial costs in complying with Australia's regulatory regimes, and government always needs to balance cost recovery against the impact that higher costs will have on Australia's attractiveness as a destination for foreign investment.

The third bill in this package, the Register of Foreign Ownership of Agricultural Land Bill 2015, establishes a register of foreign ownership of agricultural land to be operated by the Australian Taxation Office. Foreign persons will be required to register information about their existing landholdings and subsequent acquisitions and disposals of agricultural land. Labor supports the register of foreign ownership bill. We do so because it will provide for greater transparency around levels of foreign ownership of Australian agricultural land. I note that today Minister Colbeck, in question time—and I look forward to him correcting the record—misled the Senate about Labor's position. Perhaps ministers on that side ought be a little more careful about making sure that, when they say things in this parliament, they are in fact true. However, what we would say in respect of the register is that the government should ensure that it achieves the goal of transparency without imposing unnecessary costs or unintended consequences on investors, particularly on collective investment vehicles.

I want to turn now to have a discussion about the importance of investment. Investment plays a central role in any economy—investment in new plant, equipment and buildings, investment in new technology, investment in infrastructure like roads, ports or communications networks, and investment in starting up new businesses and expanding existing businesses. Investment is critical for an innovative, dynamic, growing economy which can provide good jobs and decent living standards. Investment has to be funded by savings, either by domestic savings or by savings sourced from other countries. Since European arrival, Australia has always relied on foreign as well as domestic savings to fund its investment needs and to build its economy. This has been overwhelmingly positive. It has only been by tapping into foreign sources of capital that we have been able to build the modern Australian economy of today. We will need to continue to attract foreign investment if we are to build the economy of tomorrow—an Australian economy that will provide the jobs, sustain the living standards and ensure the prosperity of future generations of Australians. There are strong links between cross-border investment and trade, and I have said previously that trade and investment are two sides of the same coin. Australia will have tremendous trade opportunities in coming years from our proximity to and our presence in the Asian region. To take advantage of these new export markets, Australia will need to scale up production at home—and, to scale up production, we will need investment, including foreign investment. That is why we need to be very careful about introducing policies which impose barriers against foreign investment.

This is especially the case in the agriculture and food-processing sectors because they are going to need large-scale investment in coming years. Agriculture and food are two sectors of our economy that stand to gain the most from the opportunities of international trade and international investment. The National Farmers' Federation has estimated that, for Australian agriculture to reach the capacity which will be needed to meet rising demand, it will require investment of between $1.2 trillion and $1.5 trillion over the next 35 years—that is $1.2 trillion to $1.5 trillion over the next 35 years. That is a very significant requirement and it will require a substantial contribution from foreign capital. It is inconceivable, regardless of the extent of our domestic savings—and I am from a party that introduced compulsory superannuation, which obviously added substantially to the Australian savings pool—that this level of investment can be funded entirely from domestic sources.

Unfortunately, the Abbott-Turnbull government has adopted a retrograde stance on investment in agriculture. The rot started early this term with the proposed acquisition of GrainCorp by ADM. The government took a highly political approach to this proposed $3.4 billion investment. Certainty about Australia's foreign investment policy and transparency in communicating reasons for decisions are important for investor confidence. The government's capricious handling of the proposed ADM investment damaged Australia's reputation as an investment destination. Since then, the Abbott-Turnbull government—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

They're the biggest tax dodgers on the planet.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Since then, the Abbott-Turnbull government—

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I thought they were serious about tax avoidance.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Order!

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I look forward to Senator Canavan and Senator Heffernan making their contributions, and I look forward to Senator McGrath perhaps telling us what he really thinks about the policy.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I have a point of order, Mr Acting Deputy President. If Senator Wong could just define investment between corporate and sovereign—

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Heffernan, that is not a point of order.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Penny, sovereign law hasn't caught up with—

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

No, Senator Heffernan, resume your seat. There are two points in this. Firstly, spurious points of order should not be taken. Secondly, you should refer to senators, even when interjecting upon them, by their appropriate titles.

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Since then, the Abbott-Turnbull government has been busily imposing new regulatory barriers, new layers of red tape and new costs on foreign investment in Australian agriculture and agribusiness. The government has already implemented new barriers on investment in agricultural land by way of policy, and now it is seeking to impose further restrictions on investment in agribusiness through provisions contained in the first of the bills we are debating today, the Foreign Acquisitions and Takeovers Legislation Amendment Bill, and through associated regulations which have been issued in exposure draft form. These changes introduce a complex regime of differential and discriminatory thresholds for Foreign Investment Review Board screening of proposed inward investments in Australia.

Let us first take agricultural land. The government has reduced the investment screening threshold for agricultural land to $15 million for investors from China, Korea and Japan but not for investors from the United States or New Zealand. Furthermore, the new $15 million threshold on investment in agricultural land even applies where an existing investor seeks to make improvements to their property. So, buying a small adjoining parcel of land, perhaps to facilitate significant investment in improved farm infrastructure, triggers a FIRB review if it takes the cumulative value of the investment above $15 million. What is the public policy rationale for that?

The new rules are not just a deterrent to new investors. They also create disincentives for existing investors to improve their operations. The red tape and restrictions on investment do not stop at agricultural land. The government is also proposing a whole new foreign investment regime for what it calls agribusiness. It wants to introduce a FIRB screening threshold of $55 million for investments in agribusiness. Through the amendment bill and the associated regulations, the government is seeking to define agribusiness so broadly that it would include all of Australia's agriculture, forestry and fishing industries and about half of the food product manufacturing sector. The definition of agribusiness will include abattoirs, seafood processors, dairy product manufacturers, fruit and vegetable processing, oil and fat manufacturing and cake, pastry and biscuit makers.

Adding to the complexity, if just a quarter of a business is engaged in agribusiness the whole business is caught by the new test. Can you imagine if a Labor government sought to introduce such ridiculous propositions into this chamber? These new screening thresholds and red tape come on top of the new FIRB application fees I have already mentioned—fees that will collect some $735 in revenue over four years, making Australia one of the few countries in the world to impose a tax on inward investment. These policies will make it harder for Australia to attract an investment. They will make it harder for farmers and food manufacturers to raise capital, and they will put downward pressure on the values of farm assets. Australia has always required foreign capital to build our economy. If we are serious about growing our food exports to the growing markets of our regions we will need foreign as well as domestic investment in our agricultural sector and in agribusiness. Placing hurdles in the way of this investment only jeopardises the growth of our primary production industries and jeopardises Australian jobs.

The government's changes in respect of agricultural land and agribusiness have been the subject of widespread criticism from the business community. The new barriers to foreign investment have been criticised by the Business Council of Australia, the Australian Food and Grocery Council, the Queensland Farmers Federation, the Western Australian Chamber of Commerce and Industry and a range of other business and farm groups. The Queensland Farmers Federation—I hope Senator Canavan is listening—has said that the $15 million threshold for agricultural land puts barriers in the way of foreign investment and sends the wrong message to overseas investors who see value in investing in Australian agriculture. QFF's CEO went on to say:

Foreign investment is a crucial part of the investment landscape and vital to growth and productivity. Our sector has relied on it. We must resist basic calls that tread too close to fear without evidence, as this sends a negative message that the process for investment in Australian agriculture is too complicated and risky.

Mr Brent Finlay, from the NFF, has said that the $15 million threshold could 'choke' foreign investment in the farm sector. And the Western Australian Chamber of Commerce and Industry has said:

Reducing the Foreign Investment Review Board screening threshold for private investors from $252 million to $15 million will make it more difficult for the sector to access much needed capital for expansion, by introducing an additional layer of regulation, another step in approval process, and additional costs for foreign investors embarking on projects.

The government's changes to the FIRB screening thresholds will make Australia less attractive as a destination for foreign investment. At the very time when our agriculture and food processing industries are looking to expand to take advantage of export opportunities, the government is introducing restrictions that make it harder for these industries to secure new investment.

Labor supports a more open investment regime, and we foreshadow that we will move amendments to the bill in the committee stage to remove the most egregious of these new measures. And a future Labor government will consider further reductions to barriers to inward investment. Labor's amendments to the bill would remove the government's proposed requirements for FIRB screening of investments in agribusiness worth more than $55 million. There is no policy rationale for imposing these barriers to investment in agribusiness. The government's legislation creates the truly bizarre position that the threshold for foreign investment in genuinely sensitive sectors like uranium extraction and defence industries would be nearly five times higher than for food manufacturing. What is the rationale for that? How is it possible that we regard investment in agribusiness, in food processing and in abattoirs as somehow more sensitive to the national interest than investment in uranium extraction or our defence industries? A foreign investor buying a stake in a uranium mine in Australia faces a screening threshold of $252 million. A foreign investor looking to buy a stake in a food manufacturing plant faces a screening threshold of $55 million. This threshold of $55 million will apply to investment in a very large number of businesses in this country, because, as I said earlier, the government is defining agribusiness so broadly that it will cover around half of all food processors and manufacturers in Australia.

The Australian Food and Grocery Council has rejected the government's proposals. In its submission to the inquiry of the Senate Standing Committee on Economics into these bills, the council warned that they would have a 'chilling effect' on foreign investment. The submission went on to say:

This is particularly relevant to high-growth, often mid-tier food manufacturers seeking access to foreign investment to fund rapid expansion, including to meet export growth potential.

The council said that the government's barriers to investment in agribusiness will discourage investment, are not based on a clear public policy objective, are not an appropriate response to competition concerns, are inconsistent with the government's efforts to attract foreign investment and undermine efforts to build stronger economic relationships through trade agreements. That is a comprehensive critique of this government's proposals.

Labor has listened to industry. We are seeking to encourage foreign investment, not to deter it. Accordingly, our amendments would remove the separate treatment of agribusiness in this bill and will ensure that agribusiness is treated in the same way as other non-sensitive sectors of the economy when it comes to foreign investment, rather than being singled out for restrictive new barriers and onerous layers of red tape.

In the committee stage, we will also move amendments dealing with agricultural land. Our amendments would increase the FIRB screening threshold for investment in agricultural land from $15 million on a cumulative basis, which has been proposed by the government, to $50 million on a non-cumulative basis. This is the level required under the FTAs former Prime Minister Howard negotiated with Singapore and Thailand. Increasing the threshold to this level would reduce the discriminatory treatment of our North Asian trading partners under the government's policy. The government have not explained why they believe John Howard got it wrong and why the threshold had to be radically cut from that which he and Mr Vaile agreed to.

Labor remains to be convinced that there is a sound policy basis for separate treatment of agricultural land. Accordingly, a Labor government would consider whether to retain the carve-outs in respect of agricultural land introduced by this government. In the meantime, our amendments would set the threshold at $50 million, consistent with the approach taken by the former Howard government in the free trade agreements it negotiated with Singapore and Thailand.

Labor's amendments have been supported by the Business Council of Australia and by the Australian Food and Grocery Council because our position favours investment. It is not too late for those in the government who know better to come to their senses and to join Labor in a pro-investment stance. It is an open secret in Canberra that the former Prime Minister pushed through these new investment restrictions despite opposition from his trade and investment minister and his Treasurer. The challenge for the Liberal Party under the new leader, Mr Turnbull, is whether it will stand up for an open economy by supporting Labor's amendments to this bill or whether it will simply rubber-stamp the anti-investment barriers concocted by Mr Abbott and Mr Joyce. Will the Liberal Party in this place vote for an open, outward-looking investment regime, or are they simply going to tap the mat and take the protectionist path, voting for more red tape and more barriers against people investing in this country, building businesses and creating jobs? The government's position has no public policy rationale.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Mr Acting Deputy President—

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Heffernan, you are not on my call sheet. Was it something relevant?

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

I just want to make some corrections.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

No, Senator Heffernan, I am not going to give you the call. I am going to go back to my call sheet.

Senator Heffernan interjecting—

Order! Resume your seat, Senator Heffernan.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I rise today on behalf of the Greens to put our views forward on the government business in front of us. The three separate bills before us are the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015—known as the acquisitions bill; the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015—known as the fees bill; and the Register of Foreign Ownership of Agricultural Land Bill 2015—known as the register bill. These bills essentially change the thresholds that determine when foreign investment needs to be reviewed; increase the penalties for noncompliance; establish application fees for foreign investment; and establish a register of foreign investment in agricultural land.

The Greens support, and have always supported, measures to ensure that foreign investment is subject to rigorous assessment to ensure that it is in the national interest. We have also always supported the view that the public has a right to know the level of foreign ownership of agricultural land and water rights. This is perhaps where the Greens would differ from Labor on this issue. We cannot have good policies without data. When we look at the very serious issues that not just Australia but also other nations around the world are confronting around food security and water shortages, if you do not have the data to be able to quantify that how can you have good policies? Data is essential for good policies.

I think a register of agricultural land is exactly what we need in this country. I have been asking questions about this for three years, and I know that Senator Milne was asking these questions for a decade before me. I know that the ABS have looked at this. Back in 2010 they were tasked to look at levels of land ownership. They looked at water resource ownership. This process kicked off a long time ago, but we have never actually got good policy in place that we can use to help us make decisions. Based on the Greens' policy aims—that is, to increase the transparency and accountability of the Foreign Investment Review Board in making its decisions against the national interest test—I would say that the national interest test should be strengthened to incorporate the national ecological and social objectives that the Greens hold dear to their hearts. We went to the last election with a policy to legislate to strengthen the national interest test to look at what I suppose have become known as triple-bottom-line objectives. So, from our point of view, it is an absolute no-brainer to collect more data, and the best way to do that is to put resources into it by establishing a register of foreign ownership of agricultural land.

Furthermore, we believe that investment that meets certain threshold tests should be referred to the Treasurer for review. The Treasurer can reject, approve conditionally or approve unconditionally applications for foreign investment. We think that is a very reasonable thing given the importance of the national interest, although I have to say that I am not quite sure how the national interest is determined exactly. I have looked at this several times over the years, and it seems that these decisions are pretty political. Perhaps this can help with the politics as well.

We think the national implications of foreign investment are a lot broader than just looking at trickle-down economics and listening to the big end of town with their views on this particular set of bills that we are debating here today. To give you an idea, we estimate that 80 per cent of agricultural land is currently Australian owned. There is no comprehensive data on the source of other-country investment in Australia. However, as a guide, in relation to capital investment in Australian agriculture Canada, the US and the UK account for over half of the foreign investment. In terms of the arguments about xenophobia, China accounts for less than one per cent at this point in time. Senator Heffernan may have other information—I am not inviting him to stand up and interject—but that is our estimate.

Australia is also a net exporter of food. It exports $32 billion worth of food and beverages and imports $12 billion worth of food and beverages. Foreign investment in housing, interestingly, accounts for about 10 per cent of all investment, of which 10 per cent is from Chinese investors. I will get to the xenophobic politics around this debate in a minute. I agree with Senator Wong that foreign investors are a significant source of capital across the board in our country—and they always have been. We have run a current account deficit since Federation, with the exception of two years, because we have relied on foreign capital to grow our nation. That is something we have become very familiar with. But that does not mean we should not better understand the nature of foreign ownership in the country and the risk, especially in productive assets such as productive farmland.

On that point, in terms of the agricultural land component of this, the Greens sustainable agriculture policy aims to ensure that the FIRB rigorously regulates, monitors and reports on all foreign acquisition and ownership of agricultural land to ensure that it does not impact negatively on Australian agriculture and food security. I think Senator Milne would really wish that she had been here in the last couple of days, especially around the significant debate we have just had around transparency and disclosure of tax affairs and the debate we are now having on the ownership of agricultural land and putting in place measures that help us to better understand that. I think she would have loved to have been here in the Senate. These are two things she has worked on as hard as anyone in this parliament in recent years.

Senator Milne took to the last election a substantial policy about whether the world is facing a food crisis. It had a lot of quantitative and qualitative work done on it. This initiative we called the Foreign Ownership of Land initiative. And guess what? The key plank of that was the creation of a register of foreign ownership of agricultural land and water assets in this country as well. We also wanted to see a lower threshold for the review of agricultural land and water assets. On this point, our policy differs from what is being proposed by the government in terms of its FIRB threshold. In this bill, that is being lowered to $15 million but we wanted to see it lowered to $5 million. In that sense, I suppose we were a little more hardline on this. But let's think about this. We are talking about a referral to FIRB. How many FIRB referrals have actually led to a rejection of foreign ownership of agricultural assets and land? Well, we have had one—Archer Daniels Midland—

Senator Heffernan interjecting—

No, it was not land, it was an agricultural asset—and I did say agricultural assets and land. Nevertheless, there have been very few rejections—as there have been across other asset classes. So having lower levels of review is not necessarily a barrier to foreign investment; it is just a process that allows us to get better information when we send these assets—be they agricultural land or other assets—off to review. So it is not a barrier to investment; it is just something that we should reserve the right to in terms of our sovereignty and our ability to regulate this kind of thing and build our database. Unlike Labor, I do not believe that simply sending things off to review is a barrier to investment. Actually, we are rejecting outright ownership of land by state owned enterprises; this is a harder line, but this bill is asking for review.

I think the substantial interest test is interesting—and I will get to that in a minute—but the acquisition bill proposes to reduce the threshold from $252 million, indexed annually, to $15 million. We may or may not move amendments to reduce that further to $5 million. Nevertheless, we do like the direction of this. Clearly, it is not what we want, but it is better than what we have got now. We know that the new threshold is cumulative; it takes account of an investor's total land holdings. The acquisition bill does not prevent foreign governments from owning agricultural land but any level of investment in land by foreign governments will be subject to this automatic review, which we agree with.

This is the point that really interests me about this debate. However, consistent with free trade agreements, the threshold for private investors from the United States, New Zealand and Chile is $1.094 billion and for Singapore and Thailand it is $50 million. ChAFTA, the Chinese free trade deal, does not stipulate a specific threshold for private Chinese investors—although this has been slated for review. Like a lot of ChAFTA, given how politically sensitive this issue is, it has been put on the backburner or perhaps in the too-hard basket; it has been put off for the future. So I am quite interested in the interaction of the laws that we may pass today and how that is going to impact on future negotiations around the Chinese free trade deal. It has not been completed yet, but we will deal with that later.

The politics on this is interesting. Senator Heffernan and some of the Nationals senators are in the bush. As Senator Milne reflected about her electorate of Tasmania, which is largely a rural electorate, this is a big issue for farmers and those living on the land in this country. No doubt, given the fiesta of free trade deals that the Liberal Party has been signing, they want something to wave in the air and show their constituents; otherwise, they will not get any Christmas cards this Christmas. This is a good policy they can take to them to show that they are taking this issue seriously and reviewing it.

The Labor politics around this, which has been in the papers in recent weeks, is that it is xenophobic. That is a bit of payback to the government for the lines that they aimed at the Labor Party around ChAFTA. To me, it is not about xenophobia; it is about the spaghetti bowl of trade deals that we sign in this country, and the fact that we have all of these different FIRB review limits. All of these bilateral trade deals are negotiated in a totally ad hoc manner by different governments over a long period of time. It is a really good example of how we lock ourselves and our nation into policy outcomes when we negotiate these secret trade deals behind closed doors, and how we do not have a holistic approach to this kind of thing. So it is quite ironic that we are putting in place a $15 million limit when we have other limits in trade deals, and that cannot be changed.

I would also like to know, with those nations or corporations who would invest in Australia in the future, if we were to have a $15 million FIRB review, would that trigger an investor-state dispute settlement clause? These things are written into trade deals, and the investment chapters in these trade deals that have ISDSs in them relate to the other chapters in the deal. I would like to know whether we would have reneged or discriminated against a foreign firm. Could FIRB reviews be seen in the world—this new frightening world of international trade deals—as discriminating against foreign companies? Of course they could.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Or should we be able to buy land in China?

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Order!

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Yes. Or, for an investor with deep pockets who wants to hold up an investment value or a future profits concern in this country, why wouldn't they use ISDS clauses to tie up a government? The Archer Daniels Midland one is interesting because they did sue Mexico using an ISDS clause for a decision by the Mexican government. Had we had an ISDS clause with the US from 2004 when we negotiated a free trade deal with the US—and, Senator Heffernan, you will be interested in this, and I am sure you will understand—I would not have been surprised if the FIRB decision that we made in relation to that asset would have triggered us being sued, with us being seen as being discriminatory. I just wanted to make the point that you cannot say that this is xenophobic or is targeting Asian investors. It has actually been written around our trade and investment deals that we have done with different countries.

I want to go to the point of water holdings. Water holdings are not currently, or proposed, to be included within the definition of agricultural land. The government has talked about this issue, and I know there are people on the other side of the chamber who feel deeply about this issue. It has often been raised in the Senate. The Greens would like to see a system where foreign investors will be required to report their interests in water holdings and water licences. I actually think it goes hand in glove with what we are discussing around a register of agricultural lands. Let's do it for water licences and water holdings.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Water is often more valuable than the land.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Water is often more valuable than the land. In this instance, the two go together. We have had discussions with the government about getting up an amendment to include agricultural water and a holding in agricultural water. That is something we are interested in seeing being added to this deal. It is something that I know Senator Waters, Senator Hanson-Young, Senator Siewert and Senator Milne have all campaigned on in the past. This is an opportunity for us to do that and to get that ball rolling.

In terms of the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015, this significantly increases the maximum penalties for offences, which we have no problem with at all. It expands the scope of those related parties covered by the penalties, especially the real estate agents, which we have no problem with at all. It establishes civil penalties and empowers the ATO to investigate and seek court orders for infringements. It establishes application fees which will be used to fund additional resourcing for the ATO and, potentially, for the work that will have to go into setting up the agricultural register and, hopefully, a register for water holdings in this country as well.

All in all, it is not exactly what, perhaps, the Greens had wanted, but there are other things that we can try to legislate. We do feel—and it is very dear to our party—that we need to take measures to help mitigate dangerous climate change. We need to take food security seriously. Other nations are taking food security seriously. We know that extreme weather events are likely to increase in the future, and they have devastating impacts on agricultural land and on the production of food. And there is water. In a climate constrained world, what is more important than water? There is clean air and a few other important things, I have to admit. But water is critically important for growing food. If we do not have food, then we are going to starve. It is a really good idea to start collecting data and information that helps us assess the risks to food security in this country and gives us a better idea of how we are going to manage what we see as significant risks from climate change into the future.

We do not believe having FIRB referrals at a lower limit will impact investment. That is only for those nations that have not already negotiated trade deals. We do not believe that is a hurdle, given there have been so few rejections by the Foreign Investment Review Board. Of course, the simple principle is that we need information to make good policies and good decisions. I do not think any of us would disagree. We actually have no idea who owns, in the totality, agricultural land in this country. We have never accurately tracked foreign ownership of agricultural land and water. It is time that we actually started.

We will certainly be supporting these bills in principle. I cannot say whether we will support amendments at this stage. We have not spent enough time looking at that. We will be putting up amendments of our own. Good on the government for bringing this forward. As I said earlier, Senator Milne would have loved to have been here to be speaking in my shoes right now. This is something she has campaigned on for years. I will look forward to seeing this pass into legislation with the support of the Greens.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

I congratulate Senator Whish-Wilson and associate myself with many of the comments he has made in this debate, and I rise to support the Foreign Acquisition and Takeovers Legislation Amendment Bill 2015, the Foreign Acquisition and Takeovers Fees Imposition Bill 2015 and the Register of Foreign Ownership of Agricultural Land Bill 2015.

I want to concentrate mainly on the third of those three bills, except to summarise initially that the bills will, firstly, transfer responsibility for regulating foreign investment in residential real estate to the Australian Taxation Office, further enabling stronger enforcement, audit and compliance of those rules. Secondly, the bill will introduce additional and stricter civil and criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules. Those intermediaries, of course, are real estate agents, lawyers and others associated with those transactions. That is something that people need to be well aware of. Thirdly, the bills will introduce fees on foreign investment applications from 1 December this year so that the costs associated with processing these applications do not fall to Australians but fall to the foreign party seeking to invest.

I come to the question of the register of foreign ownership of agricultural land, which will complement the changes by establishing and improving a register of foreign ownership, operated this time by the Australian tax office. It is interesting to note that foreign investors will be required to register essential information about existing holdings as well as any subsequent acquisitions, if they wish to make them. This in turn will provide greater transparency around foreign investment.

Following on from Senator Whish-Wilson, and from Senator Heffernan who is sitting here beside me, I make the point that back in 2009-10 we had an inquiry into foreign ownership of agricultural land and water in Australia through the Rural and Regional Affairs and Transport Committee. At the time that the parties reported to us—and Senator Heffernan will remember this—there were three glaring omissions.

The first question was in relation to trapping information and data on foreign acquisitions of leased land. The officers at the table did not have any idea what we were talking about, and at the time I mentioned that 90 per cent of all pastoral land across the north of Australia, and probably 99 per cent in WA, is leased. I can provide the answer to the Senate now in response to that. It will be the case that leased land will be included in the register of foreign acquisitions. Any interest in any rural land that could be used for agricultural purposes will be caught in the registration process. I congratulate the drafters for that.

The second question that was asked, and I think it was asked by Senator Heffernan, was: if an overseas entity wanted to buy what was an agricultural property but not use it for the purposes of agriculture—in other words, coalmining—would it be captured? At the time no-one seemed to know the answer. I can confirm here today that it is still foreign investment in agricultural land and will have to be registered. In fact, it goes on to state that any land that might reasonably be used for agriculture will need to be registered with the Australian tax office, even if it is to be used for another purpose.

The third question that was placed at the time without being satisfactorily answered was: what if a state-owned entity trading through an international bank then engaged an Australian company or partnership or two upstanding people—like Heffernan and Back Enterprises? If there were scrutiny of ownership it would appear that the property was owned by two people in Australian names and so, therefore, would not attract foreign investment scrutiny. The answer to that question is: if an enterprise was purchased for those purposes and its beneficial owner is an entity which is an overseas entity, then it must be captured in the registration net. Very strict anti-avoidance rules will apply. Each of those three points is interesting and important in gaining complete data.

I want to put into perspective some information regarding foreign investment in Australia. There has been foreign investment in Australian agriculture since 1788, and had there not been we would all still be stuck around Botany Bay or Sydney Cove in lap-laps. Let me make the point that the scale of foreign investment in Australia—and these figures are now two or three years old—was a total of $170 billion, of which 2.2 per cent or $3.6 billion was associated with agriculture. The vast majority was in mining, $50 billion; manufacturing, over $30 billion; and services, in excess of $20 billion. So understand this: the level of foreign investment into agriculture in Australia is pitifully small—and, in my view, it needs to be greater.

Who are the countries that are investing in Australian agricultural assets? They include Canada, 25 per cent; United Kingdom, 22 per cent; America, 12 per cent; the United Arab Emirates, five per cent; New Zealand, 4.3 per cent; and China, which was mentioned by Senator Whish-Wilson. About 0.5 of one per cent of foreign investment in agricultural land in this country is by Chinese investors. We know that perhaps the figures will be updated as we get more and better data, but about 99 per cent of all Australian agricultural properties are Australian owned, and 89 per cent of Australian agricultural land is owned by Australians.

There is always the concern, of course, about the burgeoning demand, and it is one that we need to keep under control. But we are talking about very small figures. It will be a requirement for the purchase of agricultural land that the limit comes down from $252 million to $15 million, and I urge Senator Whish-Wilson to be satisfied for the moment with that level of $15 million for the purchase of property. If, indeed, at some time in the future it is seen to be necessary to reduce it further, let's have a look at that then.

For agribusinesses, it will be if the purchase figure exceeds $55 million. For all state owned enterprises, the Foreign Investment Review Board must review it from dollar No. 1.

I have a concern with regard to state-owned enterprises, particularly if the purpose of their purchase is to actually produce a product, a crop or whatever, that they would then send offshore—for example, if it were a wheat crop, it would go offshore, be milled into flour, turned into bread and given to their poorest citizens without there ever having been a price applied to the item. Technically, at the moment, under transfer pricing—and the gentleman on my right, Senator Heffernan, knows far more about transfer pricing than I do—it would not attract any taxation in Australia if in fact the scenario I presented were the case. I believe there is a solution to this, because that state-owned enterprise has used Australian land, Australian expertise and Australian water, and also our infrastructure system—our ports et cetera. I am of the view that the way to solve this is to treat it not unlike a mineral: there should be a royalty charged on the value of that product, consistent with its value in the Australian market, on the wharf, on the day that it transfers across the port into a vessel to go. So, in other words, if that state-owned enterprise was producing something in Australia for which there was going to be no commercial value, and therefore there would otherwise not be a tax applied, we could apply a royalty, based on the value of the product on the day that it transfers out of Australia.

In the few minutes left to me, I just want to reflect on the benefits of foreign investment in Australian agriculture. What does it and has it and will it continue to do? It will provide us with access to new technology. It will grow the Australian skills base in agricultural and agribusiness production. It will provide us with greater links to global food chains. It will provide us with access to new capital to expand agricultural production. And it will increase the scale of operations to create critical mass for trade development. If I can put one more point: now, as a result of the free trade agreements that have been negotiated, it will open the doors for Australian agricultural and related investors to actually invest into the countries with whom we are trading. I have recently come back from leading a parliamentary delegation to Indonesia, and there is no doubt at all that there is enormous scope for Australian agriculture and Australian agribusinesses to invest more into Indonesia and for them to invest here in Australia. It is pitifully small at the moment.

I am often asked about foreign investment, and I use the example of the south-east coast at Esperance. The Americans came into the Esperance region and found beach sand, basically. It is very, very light land farming along that Esperance strip. In the 1950s, the US came into the market at Esperance with their own expertise, and they failed. They came back again in the 1960s and 1970s, where they mainly and largely used Australian expertise. The Esperance Land and Development Company—which was substantially owned by American factors the Chase Manhattan Bank—had a program with the Western Australian government where they developed 100,000 acres of land a year, of which they retained 50 for farming, and 50,000 acres was divided into 2,000-acre conditional purchase blocks and made available to young people from throughout Australia to get into farming in the Esperance area. From my own experience there, as a student and as a veterinarian working with my older brother, who was the livestock manager for ELD, I know that the vast majority of those farmers who got onto those 2,000-acre CP blocks—it was light land farming; there were trace element deficiencies and all sorts of problems associated with nitrogen-rich clovers—faced an enormous number of problems along the south-east coast of Western Australia at that time. I can say to you without fear of contradiction that those problems would not have been solved had it not been for the capacity of the Americans, with Australian expertise; they brought in expertise from the United States on trace element deficiencies et cetera to actually develop.

The good news story is: this year, in the harvest season in Western Australia, the Esperance plains will be far and away the biggest wheat producer. Farmers who I have met in the last few weeks will be, for their third consecutive year, averaging in excess of five tonnes to the hectare for wheat. That is unprecedented in Western Australia.

I make this point: when the Americans left—which indeed they did; they eventually sold out—what did they take with them? Did they take the soil? Did they take the land? Did they take the fences or the water points? They did not. That whole south-east coast of Western Australia today is a prime example of the value of overseas investment in agricultural assets.

In conclusion, I commend the legislation. I do say—and I agree with Senator Whish-Wilson and others—that the more information we have the better, at all times. But this is the right direction for us to be going in. I believe so, in the case of urban real estate, but I am more committed in relation to agricultural land.

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

During my last hour in the chair, I have observed more than one senator eating in the chamber. I remind honourable senators that it is not in accordance with the standing orders, and I would encourage you not to eat while in the chamber.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

But are you allowed to chew your cud?

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

No, Senator Heffernan.

Jenny McAllister (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise to express my concern about elements of the three bills presently under consideration—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. I am particularly concerned about measures that may compromise foreign investment in our agriculture sector. These have been raised already in debate. Different senators plainly bring different views to this question. But I am concerned about the proposal to trigger FIRB reviews for investment in agricultural land and in agribusiness, which, as Senator Back acknowledged, is not a particularly large volume of activity at the moment.

Every serious review of Australia's economy in recent times identifies agriculture and food production as areas where we have enormous competitive advantages. Last year, the BCA released their terrific report about Australia's comparative advantage, which identified agriculture and food manufacturing as sectors where we are capable of winning on a global scale. In that report they are very clear about the response we need to make to this opportunity. They say that we need to take action to lift trade and investment and to foster business risk-taking to ensure this growth sector can attract capital for major projects and achieve the economies of scale so that transitioning sectors can make investments in productivity and restructuring. My concern is that the measures before us in this legislation risk that inflow of capital, which has been so clearly identified as critical to the success of this sector.

I want to spend some time talking about the way that the different thresholds will apply to different investors, depending on their country of origin. As other contributors have pointed out, there really is no obvious policy reason for the thresholds to be different. A review of an investment in agricultural land for, say, investors from China, Japan and Korea, our northern trading partners, would be triggered for an investment of just $15 million. For investors from Singapore and Thailand, a review would be triggered at $50 million. For investors from the US, New Zealand and Chile, a review would not be triggered until the investment exceeded $1 billion. For investments in agribusiness, again, for the US, New Zealand and Chile, there is no review until an investment is more than $1 billion, whereas for all other countries a review would be triggered at just $55 million.

The consequence of this is that the review thresholds for American investors are 70 times higher than for investors from our northern trading partners. It is hard for me to understand how this is in Australia's economic interests. My concern is that it will have the effect of deterring investment from China, Japan and Korea into our agriculture and agribusiness sectors. I am concerned that they will be deterred by the prospect of red tape. I am concerned that they will perceive these measures as sending a message that investment from individuals or businesses from those countries is not wanted. It is unclear to me why we would send those messages—why we would even contemplate a deterrence of this kind.

China already has enormous demand for Australian food. They have over $3 trillion in foreign currency reserves. China is potentially an enormously important source of investment in Australian agriculture and in food production and processing, and we should not be turning that away.

I want to talk a little about the significance of the agriculture and food sectors and their potential importance to our economy. We are part-way through a massive growth in the world market for food. We need to make sure that we are positioned to take advantage of these opportunities. China is already a huge market for Australian food, and it will grow substantially in the coming years. In 2012-13, China was the second-largest export destination for Australian food, accounting for 10 per cent by value of total Australian food exports. It is estimated that in the last 12 months China may have already become the largest export destination for Australian food. We know that there are already 250 million people in China who were designated as middle class, and we expect that to grow substantially. As more Chinese enter the middle class the demand for high-quality and value-added Australian food, such as wine, meat, infant formula, seafood and dairy products can only grow.

We are going to need significant investment in order to capture as much value as possible from the global food market. Senator Wong referred to these figures: the National Farmers' Federation has estimated that Australian agriculture will require investment of between $1.2 trillion and $1.5 trillion over the next 35 years to increase the capacity needed to meet these rising demands. It is inconceivable that we could domestically source the capital for this level of growth. We will need to source that capital from overseas. We need it both for investment in agricultural land and operations and for investment in agribusiness and food processing.

Unfortunately, in particular for agricultural land, this legislation sets a very low threshold beyond which an FIRB review of an investment in land would be triggered. In their submission, the Cattle Council of Australia raised concerns about the $15 million threshold.

I think my greater concern is around agribusiness and food processing. We will certainly have a place in the global food market in the future. But the real question is: what place do we want to have in the value chain? We know that we can export raw product, but the real question in terms of Australian jobs, quality jobs for people in rural and regional Australia, is whether or not we add value to it here in factories and processing centres.

Currently, the food manufacturing sector in Australia employs more than 299,000 Australians. It makes a contribution to rural and regional economies—a very significant contribution. Almost half of the people employed in this sector live in rural and regional Australia. Often the manufacturing plant is the anchor tenant for a lot of rural towns. The food processing sector accounted for $55.9 billion in international trade in 2013-14, and it represents more than a quarter of the manufacturing industry in this country.

The government's own brochures and own messages seek to encourage investment in Australian agribusiness. They include in their website a whole lot of examples about Japanese investment in wheat processing for noodles, British investment in milk processing, and Chinese investment in sugar processing. But my great concern is that some of the measures in this bill will seek to discourage investments of exactly this kind, which have the potential to do so much good for small towns all around Australia.

I am concerned about the relatively low threshold—at $55 million for a FIRB review—for investment in agribusiness, but I share the concerns of the Australian Food and Grocery Council about the very, very broad definition of agribusiness that is being used, such that it would capture about half of Australia's food manufacturing industry. Their submission indicated that the codes that are used in the draft legislation would include the manufacturing of baby food, baked beans and canned spaghetti, chutney, relish, jam and sauce. Their research also indicates double-digit export growth in some of these product categories. Why would we hobble investment in activities of this kind? And, of course, their submission is most concerned about the failure to articulate any real public policy objective around these questions. It said:

Given the lack of a clear public policy objective, the significant increase in red tape and regulatory cost, and its application to more than half of Australia's food manufacturing sector, the AFGC opposes the imposition of these changes on food processing.

As Senator Wong indicated in her remarks, Labor intends to propose amendments in the committee stage to ameliorate the worst elements of these bills. I simply wish to conclude by saying that I think this is a very strange position for a government to take that speaks of agility, of being outward looking, of being adaptive and being nimble, and we have heard these words many, many times in the chamber. It is a very strange position for this government to be presenting measures which are not supported by many significant stakeholders from private enterprise, which are not underwritten by any coherent public policy rationale and which are not consistent with a successful export oriented agricultural sector.

I really urge those opposite to reconsider their position and to think about what is in our national interest in terms of diversifying our economy and equipping ourselves for a place in the global food chain in the 21st century. I urge them to think about supporting the Labor amendments to this bill which will be brought through in the committee stage.

Bob Day (SA, Family First Party) Share this | Link to this | Hansard source

I speak today on the package of legislation regarding foreign investment in Australia, with particular emphasis on the register of foreign ownership of agricultural land, and to also address other aspects of this package. It has been Family First policy for many years now that there be state and federal registers of foreign owned agricultural land. In this area, perception and reality are often very different. The reality is, at times, distant from the talk at the pub or at country field days. The best way to marry the reality and the talk is, of course, through transparency. For that reason I support a register.

To be fair to the major parties, it appears that there is some level of bipartisanship on the foreign ownership register aspect. I note that former Prime Minister Rudd, late in the 2013 campaign, committed the Labor Party to establish such a register if re-elected to government. The register has also been longstanding policy for the coalition. Whilst we would have liked to see this register implemented sooner, we accept that there are political realities and challenges to work through before we get to voting on this legislation relatively late in the electoral cycle, but better late than never.

At a state level, for years Family First members of the Legislative Council in South Australia, particularly the Hon. Robert Brokenshire MLC, have been running freedom of information requests and speaking with the state Labor government about having such a register. For South Australia, the state that gave the world the innovation of a Torrens title system of land registration, it has come as a shock to us that our own land titles office is a long way short of being able to develop a register, or to even to provide, under FOI, data on the levels of ownership. They could not even provide data based on the country listed as the address of the owner of each title.

We have also communicated with the Commonwealth about whether the Foreign Investment Review Board had any data, and similarly we were surprised to find how little they could tell us about the FIRB's work. They could not, at that time, for instance, tell us how many times a Chinese state owned corporation had sought approval or how many requests they had approved or rejected. They could not tell us and, as we know, every single purchase requires this, no matter what the price might be.

The dearth of quality data at state and federal levels pointed to the need to improve the data collection and matching, and that is a key part of what the government is delivering in this package. I note that the Australian Taxation Office will be brought in to improve data collection and reporting. That is an eminently sensible approach, and the scope to further integrate with other agencies such as immigration also makes sense. Despite the current dearth of reliable data on foreign ownership—and I emphasise that my and my party's interest here is not to limit foreign investment but to provide long-overdue transparency in the information age—Australia does have a model for evidence based policy in this area, and it comes from the state of Queensland. Queensland's register of foreign ownership was developed during the Bjelke-Petersen years when there was concern about the amount of Korean and Japanese acquisitions, particularly on the Gold Coast. For many years Queensland has provided the transparency that has been needed in these debates. The latest Queensland data from 30 June shows that China has been the greatest purchaser of land in Queensland for the last three reporting years by increasing amounts: $323 million, $463 million and $872 million in those three years. Yet, when it comes to the land area owned, it is citizens or corporations from the UK that hold by far the most, and it has been increasing over the last three years, at 2.2 million hectares. The Brits also hold by far the most land parcels—individual titles—than any other nation, though China's share has been growing. That, you can reasonably infer, is far larger agricultural land ownership than China holds. The next largest landholders are citizens or corporations from the United States, with 548,000 hectares. Both the British and American landholding levels have been growing in Queensland. The top six in recent years have been rounded out by Switzerland, Denmark and the Netherlands—understandable, given the limits on their land size and strengthening their food security—and also Germany. The new entrant in the top six in the latest reporting year was China, with 237,490 hectares. This is all very good. Shire council areas with the largest foreign ownership levels are mostly in south-western Queensland: the Bulloo, Barcoo and Diamantina shires.

For those who found that informative, I am sure they would welcome a national register that can provide similar data quality and transparency. The first national data to consider is that, at last count over two years ago, the ABS found that 98.9 per cent of Australian agribusinesses were Australian owned, with 87.5 per cent of Australian agricultural land wholly Australian owned, and that was only slightly down on the figure three years earlier. What we do know from the FIRB data, Foreign Investment Review Board data, going back to the most recent available reporting year—that is, 2012-13—is that Queensland mirrors national trends. The United States and the United Kingdom are the top two on a regular basis, with China, Singapore and Canada being major purchasers. These nations' acquisition levels fluctuate year on year, though China's acquisition rate has been steadily rising.

It is important to note that, in general, these purchases are by private citizens or corporations, so they do not represent the foreign policy of a nation buying Australian land. There is an important difference, however, with some countries like China and some of the geographically small Gulf states where there are significant state owned corporations acquiring land. A Qatari state owned corporation, for instance, has been buying land in South Australia for some time and is injecting valuable foreign capital to expand South Australian farming operations. Scrutiny and transparency of farming acquisitions in Australia are not bad things. I am deputy chair of the Select Committee on the Murray-Darling Basin Plan. Among many other things we are hearing across the Basin is concern about speculators and superannuation funds and others without any relationship to farming buying water which is no longer attached to the land. Just as with an agricultural land register in this package, the Basin would be well served by having a transparent register of water transactions and major market players.

The ABS data I mentioned earlier included a measure of foreign ownership of water entitlements, which was 9.2 per cent in 2010 but rose to 14.2 per cent in 2013. A number of witnesses to the Basin inquiry so far have called for an Australian water exchange, just like a stock exchange. Family First has been sympathetic to such an idea for some time. It is better to have transparency than to directly regulate market behaviour. Every transaction and every litre of water owned by speculators should be on an Australian water exchange website for all to see. Governments, as we know, are hopeless at market regulation, but I have no concern about market transparency where it results in evidence based policy making. Having a Basin-wide water register could well address the talk about speculators, water barons, superannuation funds and the like. I flag the possibility of a Basin water register as something I hope the government has in the back of its mind when it watches how the implementation of this package, if passed, works out. If a foreign ownership register works with land, it can work with water.

I want to highlight how critical it is not to stymie Australian economic growth by making it hard to raise capital from overseas. Remember the Queensland and Foreign Investment Review Board data that I cited earlier. Significant investment comes from foreign nationals in countries that are close allies of Australia, the United States, the UK and Canada. Chinese investment in Australia is, of course, welcome. I have been encouraging those from China who approach me to connect with South Australia to look at investing with us. There are wealthy Chinese individuals and corporations with no association or direction from their government wanting to invest in secure markets like Australia.

The South Australian state government is encouraging Chinese investment, taking groups of South Australian businesses to China to encourage investment. We have to be comfortable that this package will not hinder the foreign investment that Australia needs. Australia has always needed foreign investment and will continue to need it for some time as our domestic capital is either inadequate or locked up in, for instance, superannuation funds that are reticent to invest in Australia or particularly invest in the rural sector. How can we blame farmers seeking capital overseas when Australian investment houses are not interested? I do have misgivings about the way that food manufacturers are caught within the scope of agribusinesses as defined in this package. I am concerned about the potential for disincentives in raising capital from foreign sources. South Australia has some significant food manufacturers who will be caught by the agribusiness definition in this package. I am going to err on the side of supporting transparency in this bill, but I put the government on notice that should foreign capital be impeded, particularly in my home state of South Australia, or should the Foreign Investment Review Board block sensible investment in food manufacturing, then I will revise the scope of what is considered to be an agribusiness in this package.

I want to conclude my contribution on the question of foreign investment in housing. Colleagues who have been listening to my speeches in this place will know what I am about to say about housing. The problem is on the supply side, not the demand side, when it comes to housing affordability. This bill seeks to address one of the demand drivers, in the form of investment, often blamed on the Chinese, in existing housing stock in Sydney and Melbourne. The Queensland data indicates there have been growing levels of Chinese investment. However, these sorts of reforms are dealing with the symptoms of the housing affordability disease, not the illness. If state and territory governments stopped profiteering and price gouging by restricting the amount of land available and provided more land on the urban fringes for first home buyers, then the rise in house prices would be stemmed. Affordability would improve.

For 100 years, Australians could buy a house on just one income, as the price of house and land was three times average incomes. Since the start of this century, however, that has risen to nine times average incomes. As a former national home builder, I can tell you this has nothing to do with the cost of building a house. On pure dollar terms it costs the same today as it did decades ago to build a house. I keep saying about car manufacturing in South Australia, 'Why can't we build cars as efficiently as we build houses?' There is no reason for our manufacturing sector to be failing, but there are characteristics of the labour market in the housing sector that are very different to car manufacturing.

I digress slightly, but the point is that it is the price of land, not housing materials, that has gone off the charts. Why? Constrained supply. We have state governments, like the one in my home state of South Australia, wanting to legislate an urban growth boundary and forcing so-called transit oriented development. They are so wedded to this urban planning ideology that they cannot see how they have contradicted themselves by embracing—as do I—the introduction of driverless cars. The driverless car revolution will render transit oriented development a byword of closed-minded thinking. Why use planning laws to force people to live in a one-bedroom apartment with no car parking space near a train station when, in the foreseeable future, people can call upon a driverless car, like a taxi, to show up at their doorstep? It will take them to their destination without them watching the road at all—they will probably be catching up on their favourite TV show on the way.

It is good that state Labor have embraced innovation in this way; it is commendable. It is a shame, though, that they remained wedded to the disproven beliefs of urban development, which does not improve public transport use, does not reduce pollution, does not free up farming land, does not save water, does not save electricity, and does not reduce road congestion. Every argument made in favour of urban consolidation and urban densification does not stand up to scrutiny. And there will now be a $3,000 fee for foreign purchasers to buy existing residential land—a new regulation to gouge the foreign purchaser to help pay for a stronger Foreign Investment Review Board, and provide a bit of profit on the side, I have to note.

This might make some people feel better, but lowering the entry point into the housing markets on the urban fringes will do far, far more to address the unaffordability of housing. Very few Australians living in the metropolitan area started in the city centre. They bought on the fringes and slowly moved inwards as their circumstances improved. The same should be true of the modern generation. Population is not static; it is growing. So it is only natural to expect that the urban fringe will expand outwards. Housing affordability is a crisis forcing families to have both parents working to meet massive mortgage repayments. It is hurting families and children, and I will keep highlighting this until we see some movement from state governments on this issue.

My point is that these measures on tackling foreign purchasers of real estate will, I think, fail to stack up to scrutiny soon after they are implemented. Sometimes, however, you have to let the folly run its course before people are willing to accept the facts. I am confident that, the more we equip the nation with the facts on foreign investment and demand for housing land, the clearer it will become that the supply side is where the housing affordability crisis will be resolved.

(Quorum formed)

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I support this bill but I believe it needs to go further. This is an issue I have had a longstanding interest in for a number of years. Back in 2012 I introduced a bill, co-sponsored by my then colleague Senator Christine Milne, in relation to having a much better framework of foreign investment for prime agricultural land in Australia.

It is worth mentioning what that master geopolitical strategist Henry Kissinger once said: 'Who controls the food supply controls the people.' That should be taken into account. We should also refer to Donald Rumsfeld, the master of confabulation, who came up with: 'There are things we know that we don't know.' Between them, Kissinger and Rumsfeld neatly sum up the public policy dilemma with Australia's rules on foreign investment in prime agricultural land. This is not about xenophobia. This is about having a sound policy framework in respect of our prime agricultural land. We need to question the claim that there is no reason to believe foreign investment is somehow less than beneficial if it occurs in agriculture.

Assuming that foreign investment decisions on farming are based on the same commercial considerations as foreign investment in other sectors ignores a bigger picture. We need to ask ourselves: why do other countries see Australia as such a good environment for investing in prime agricultural land? They do so because we are stable, we have a terrific clean green image for Australian agriculture and we are a place of abundance. They see investment potential for prime agricultural land. But we need to be mindful of the national interest. We need to be mindful of what Henry Kissinger once said, that food security is important. We need to ensure we have a framework that genuinely considers the national interest.

As much as it pains me to say so, it seems that the New Zealanders across the ditch have a framework for their foreign investment that is efficient, that is clear, that includes a number of set criteria for the national interest that take into account the job effects, technology transfers, what the impact will be on the market and the sector, in much more prescriptive detail than we have in Australia. We heard from the Overseas Investment Office when there was a Senate inquiry into the bills I introduced, co-sponsored with my colleague, at the time, Senator Milne. The Overseas Investment Office deals with something like 200 applications a year. They deal with them efficiently and effectively.

The threshold for the Overseas Investment Office—the equivalent of our Foreign Investment Review Board—to look at issues of foreign investment in primary cultural land is not 200 million or 300 million or 15 million, it is five hectares. It is a spatial limit. I am not suggesting for one moment that five hectares should be the appropriate limit, because it would mean that practically every agricultural land purchase by a foreign investor would be subject to that criteria. I am suggesting that a more appropriate limit would be $5 million. That does not mean it is blocked, it just means that we consider issues of the national interest, that we consider some set criteria so the Foreign Investment Review Board takes into account these factors. That is why I can foreshadow I will be moving amendments, to one of these bills, that set out the criteria based on what the New Zealanders have been doing. It hurts me to say it, that the New Zealanders do it better than we do on it, but it seems that they do. It has been worked, it has been tried and it has been proven.

There is another issue, here, that we need to take into account. I believe that we can feed the world ourselves. I am referring, specifically, to a very good opinion piece by David Farley who was the chief executive of the Australian Agricultural Company. He is well known, well regarded and a real leader and visionary in this field. In the opinion piece in The Australian Financial Review, on 7 June 2012, Mr Farley made reference to how the Gillard government was courting China to play a role in the agricultural expansion of Northern Australia.

I do not have an issue with that per se but I do agree with Senator Heffernan—that you need to take into account whether there are state owned enterprises involved. What concerns me, in questioning of the Foreign Investment Review Board through the Senate processes, is that if it is a state owned enterprise, clearly, they must get government approval in order to invest. If it is a company that, on the face of it, is not a state owned enterprise but is beholden to a massive loan from the Chinese government, for instance, the independence of that—the links with the government of China or, indeed, with any other foreign government—means it is a de facto state owned enterprise. Therefore, there should be triggers involved. I wonder whether the Foreign Investment Review Board has the requisite resources to determine the independence of a private overseas company or even a public company, in relation to these purchases.

This is the point that David Farley made almost 3½ years ago. It is worth making again, because we are losing sight of the bigger picture. Mr Farley said:

Why has the government lost confidence in local agribusiness developing our agricultural future?

He says:

Australia has a critical role to play in meeting the demand created from that expected 40 per cent increase—

in global population, which is 'forecast to peak at nine billion within 38 years'.

Sixty per cent of the food produced by our farms is exported, something that is missed with the constant focus on Australia's role in the global mining boom.

You may remember that mining boom, Mr Acting Deputy President. Sadly, it is behind us.

Christopher Back (WA, Liberal Party) Share this | Link to this | Hansard source

Only temporarily.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Only temporarily? It is very unusual for the chair to respond in that way, but I am grateful he did. I hope it is temporary, Mr Acting Deputy President, for the sake of your state and for the sake of the entire nation. Even though your intervention was very much out of order, I am glad you said something.

I think that we need to listen to what Mr Farley said back then, which has as much or even more resonance now because we need agricultural exports more than ever for the prosperity of our nation. Mr Farley says:

Time is of the essence in determining how we are to meet the projected global demand for food, and Australia is well positioned as we have significant natural agricultural assets that can be developed; our northern regions are ripe for expansion.

He says:

There is no time for floundering. Food demand is relentless and decisions have to be made around the scale of development and the location of ports, roads and irrigation infrastructure.

He goes on to say:

Agriculture in Australia has the ability to conduct a development of this scale and we have the resources.

He says he understands:

… why China is looking for external agricultural investments, and is exploring the role it can play in the long-awaited expansion of the Ord irrigation project. But why should China have the inside running on a project of national significance?

Before I refer to Mr Farley again, I want to make mention of the much-vaunted Northern Australia program. I know that Senator Ian Macdonald has been a passionate advocate of that, and all credit to him. I do not have a problem with having that fund; I do not have a problem with kick-starting the north of Australia; but I do have a problem if we ignore the southern states and if we ignore the abundance of southern regions, including in my home state of South Australia, where there is enormous potential, particularly with the demise of manufacturing, to grow the agricultural sector and the food-processing sector to be an economic and jobs powerhouse to fill that massive void that will be left once Holden leaves South Australia as a manufacturer at the end of 2017, with the supply chain impact that will have.

Mr Farley says:

Agriculture in Australia has the ability to conduct a development of this scale and we have the resources.

He says:

First, we have the capital, with our large superannuation base and an attractive taxation development environment. Our super funds have made it known they are keen to be involved. At the moment they are forced to invest offshore because of a shortage here of large, scalable agricultural infrastructure projects.

Second, we have the production skills—in cotton, wheat, sugar, oil seeds, rice and pastoral pursuits.

Third, Australia has a track record of successful agricultural development. There are numerous examples, including the Murray and Goulburn Valley irrigation schemes, the Darling Downs and the Victorian Mallee development.

He goes on to say:

Australia is also a global leader in agri-technology adoption, which will be important in opening up northern Australia.

What Mr Farley says, and I agree with him, is:

Our political and business leaders are arguing that we need to pay more respect to China and put more effort into our relations with the Chinese at the expense of our neighbouring South-East Asian countries.

He says:

I would say more respect should be paid to the expertise contained in our own agricultural industry and more effort put into making sure that Australia is equipped to play its role in the global demand for food.

Australia's agricultural credentials are 'undeniable', says Mr Farley.

What I am urging the parliament in the context of this debate is that this should not just be about having more transparency when it comes to foreign investment. By the way, Mr Acting Deputy President, if you want to buy a few hectares in China or Thailand—or Japan, for that matter—good luck to you. You will not be able to do it because their foreign investment rules are much stricter than ours. Even in Indonesia it has to be a joint venture, minority controlled, if you can invest at all. So let us be clear about that. We are, in relative terms, a very open economy. The concern I have is that we need that transparency to drive that public policy debate and we need to have a clear national interest test, but, if we want to look at the big picture, what we need to look at here is having an investment environment for local investment, for Australian investment, for our super funds, for the Future Fund and, indeed, if we ever get around to it, for a sovereign wealth fund, to be looking at driving growth in our agricultural sector and in agribusiness in this country—because that is the future. Agriculture is the ultimate renewable resource, it is something that there will always be a demand for and we have this tremendous clean and green reputation.

They are the matters that I think ought to be considered. I urge the government, the opposition and my crossbench colleagues, in the context of this debate, to heed the words of David Farley and other leaders in agribusiness, that we need to look at the potential for Australian investment in Australian agriculture and to have a good, solid investment environment for that. The reason why other countries are so keen to invest in our primary agricultural land is that they can see the future. They can see that what they are investing in has great long-term prospects. It is a pity that we do not see the same prospects here with investment vehicles and with the ability of superannuation funds to invest in large agriculture and related infrastructure projects.

I do support this bill. I will be moving a series of amendments to the bill. I urge my colleagues to look at the issue of criteria and a framework that is based on New Zealand's. I think we can learn from the Kiwis in relation to this. What they have is practical. It is sensible, it properly considers the national interest and it is in a framework that is efficiently administered with a minimal degree of red tape. They fast-track these matters, but they will look at them and, if a project falls at a particular hurdle because it will not be in the national interest, it will be dealt with appropriately. We need to have those more prescriptive criteria, I believe. We could learn a lot from the Overseas Investment Act of New Zealand. There are technical matters in the bill concerning the Treasurer's power to issue orders in relation to significant actions. I will deal with those in the committee stage.

Broadly and thematically, I want to emphasise that we need this transparency. We need to have a framework of being informed in our debate by having this register, and I commend the government for doing so. And I commend the Nationals for the work they have done on this. People such as former senator Barnaby Joyce, now the agriculture minister, was a great advocate of this, as was Senator Scullion, as was Senator Williams. A whole range of Nationals senators pushed this because they could understand that in the bush there was a concern about that lack of transparency.

So, I welcome this. Probably the $15 million threshold is too high; $5 million is more appropriate, given that in the 1970s it was a $1 million threshold, and if you allow for inflation then $5 million is about right. But here is an opportunity, Mr Acting Deputy President Back—and I am not sure whether you will interject again!—to, post the mining boom, look at the opportunities of Australian agriculture, not just via foreign investment and the need to have a much more transparent and accountable foreign investment regime but also to look at the potential for Australian capital, Australian superannuation funds, to be able to invest in Australian agriculture, whether it is in the north of Australia or the south of Australia or anywhere in between, to realise the full potential of this wonderful ultimate renewable resource that is agricultural produce.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

I oppose the foreign investment bills before us today—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 will hurt Australians who want to sell their property, by scaring away potential buyers. All Australians who will one day want to sell their property should see their bills as a violation of their property rights that will make them poorer. The bills scare away potential buyers by raising the hurdles that foreign investors need to jump in order to invest in Australia. There is no valid reason for this. Indeed, there is no valid reason for the existence of the hurdles at all. The government's explanatory memorandum states:

… there is a need to review foreign investment proposals to ensure proposals are consistent with Australia’s interests.

But the explanatory memorandum fails to identify one cost or risk of foreign investment. The lack of costs and the preponderance of benefits from foreign investment suggests that foreign investment is always consistent with Australia's interests and the entire foreign investment review process is a farce.

We do not need to hinder foreign investment for national security reasons. If there is a risk from a Chinese government investor owning a shipbuilding or internet company operating in Australia, then the same risk is present if a disloyal Australian investor owns the same shipbuilding or internet company. Thinking that we can achieve national security by keeping out Chinese government investors is naive. If a shipbuilding or internet company operating in Australia needs to be managed in a specific way to protect our national security, then we should regulate the company accordingly, regardless of who owns it. For similar reasons, we do not need to hinder foreign investment to achieve industry development. The Australian government may hope that key companies in Australia expand their operations, use local suppliers and sell to local distributors. But an Australian owned company is just as likely to disappoint on this front as a foreign owned company. Foreign investment has nothing to do with food security or energy security. A company may want to export its products rather than service the domestic market, regardless of who owns the company. That is fine, as Australia is not at risk of going without food or energy. We are a net exporter of both food and energy, and both are readily imported.

Some people are concerned that foreign companies could sell Australian-made food or energy back to their home countries for below-market prices. But the ATO's transfer pricing rules are designed to ensure that this practice would have no impact on the contribution that foreign companies pay to us in tax. We do not need to hinder foreign investment to ensure a competitive market. The ACCC can rule out acquisitions it deems to be anticompetitive, regardless of whether or not the prospective acquirer is a foreigner.

Finally, the idea that we should restrict foreign investment in housing in order to suppress house prices is absurd. Foreign investors help Australian sellers, and their investment encourages an expansion of housing supply. So there is no valid reason to put any hurdles in the way of foreign investors. Instead, it boils down to xenophobia. There is as much logic in restricting foreign investors as there would be in restricting gay investors or black investors. These bills will raise the hurdles that foreign investors need to jump in a number of ways. The bills introduce foreign investment application taxes. The government is calling them fees, but the legislation makes it clear that they are taxes. The taxes are substantial, ranging from $5,000 to $100,000. The taxes apply to each purchase and can also apply when an attempted purchase falls through.

These taxes, like all other taxes on international capital flows, will have two effects. First, they will reduce the supply of foreign capital to Australia, making us poorer. That some foreigners will be dissuaded from investing in Australia because of these taxes is undeniable. Second, these taxes will hurt the Australians wanting to do business with foreign investors. The taxes will be physically paid by the foreigners buying assets in Australia. But because foreigners have literally a world of investment options before them, they will not cop any attempt to make them pay more than the going rate for an asset. So the taxes will effectively be paid by Australians, because they will have to accept a lower price when selling their asset to compensate for the new tax.

The government estimates that this tax hike will generate more than $700 million by June 2019. This will far exceed the costs of regulating foreign investment. So there is no avoiding the conclusion that this is a blatant and economically irresponsible tax grab. The bills provide the Treasurer with the discretion to waive the payment of these taxes. The Treasurer will effectively be unconstrained in the use of this discretion as he need only be satisfied that a waiver is not contrary to the national interest. No guidance on the circumstances in which a waiver should or should not apply is provided. This is astonishing. It is a licence for arbitrariness and uncertainty, for favourable treatment of mates and for corruption.

Another way these bills discourage foreign investment is by facilitating more rigorous enforcement of the ban on foreign investment in existing residential real estate. This ban is nonsensical, particularly as real estate cannot be shipped off like the family silver. The government justifies the ban by saying it wants to promote Australia's housing stock. But allowing foreigners to buy existing residences would encourage the building of new residences. The bills facilitate more rigorous enforcement of the ban by making the ATO responsible for enforcing it. Fans of The Untouchables might find it romantic to empower our own internal revenue service with bringing down gangsters, but a foreigner who buys residential real estate is no Al Capone. Prohibition was and always will be a terrible policy.

The bills before us today raise the hurdles foreign investors need to jump by extending foreign investment restrictions to a broader range of agricultural investments. This means that foreigners will need to get the Treasurer's approval before buying an agribusiness or a certain amount of agricultural land. Foreigners will be charged taxes of up to $100,000 each time a decision from the Treasurer is sought, and decisions can be delayed for up to four months. Any foreigner who buys an agricultural asset without the Treasurer's approval will face penalties including fines of up to $135,000, jail of up to three years, orders to sell the asset in question to certain buyers or the seizure of the asset by the Commonwealth. All of this will send a very clear signal to prospective foreign investors in Australian agriculture: 'You are not welcome.'

An agribusiness will be defined as a business where a currently unknown share of its revenue, profit or assets relates to agriculture, forestry, fishing or food manufacturing. However, manufacturers of cured meat, smallgoods, ice-cream, cereal, pasta and confectionery will be excluded. Also, those businesses lucky enough to be classified as manufacturers of 'other' foods will be excluded. This is all as clear as mud.

Similar clarity applies in relation to which agricultural land transactions will be subject to the foreign investment restrictions. The details are not included in the bills, but the government have suggested that they will regulate to exclude agricultural land transactions where the foreigner ends up with less than $15 million worth of agricultural land. The government have provided no detail on how and when holdings are to be valued. The upshot of this is that foreigners who already own agricultural land will be able to bid freely for agricultural land only up to a vague range. Once bidding reaches this vague range, foreigners will presumably have to withdraw from bidding. Only if they get a valuation for their existing holdings, pay a tax to the Treasurer and get his eventual approval will the foreigners be able to re-enter the bidding. A more sure-fire way to scare away buyers is hard to imagine.

The government estimates that 125 agricultural land transactions a year will be threatened by this extension of the foreign investment restrictions. The government estimates that complying with these restrictions will cost foreigners $10,000 per transaction over and above the new taxes that need to be paid. This will not only scare away buyers but also ensure that the prices that Australian farmers receive will be severely depressed. This is a policy that hurts rather than helps farmers. The only potential beneficiaries are hangers-on in farming who want nothing to ever change. But pandering to these fuddy-duddies will only condemn our farming communities to a slow, grey decline into backwardness. Labor have an amendment to exclude agribusiness from this regulatory nightmare and to lift the threshold on the value of agricultural land beyond which the screening processes kick in. Labor should be congratulated for this amendment, although I wish they did not support the rest of the government's bill.

These bills ramp up criminal penalties for the sin of investing in Australia. This is completely unwarranted, and existing penalties have never even been imposed. The bills also introduce civil penalties. For instance, a foreigner who commits the sin of buying residential land from a willing seller can be hit with a civil fine equal to 10 per cent of the land's value. Some of the civil penalties can be imposed through the issuing of infringement notices. This means that if people believe they have done nothing wrong they will have to prove their innocence. The fines set out in these bills are well in excess of the levels recommended in the government's own guide to framing Commonwealth offences. The government justifies this by saying that the fines must counteract the large financial gain a foreigner can get from holding an Australian asset without approval. But the financial gain is marginal. The foreigners are not stealing multimillion dollar assets; they are paying willing sellers for them.

These bills also discourage foreign investment by requiring foreign holders of agricultural land to report to the ATO so it can create a register. The government does not explain why we need to keep a list of foreigners who own a parcel of land. Perhaps we need to know when a foreigner is walking down the street, perhaps by passing a law requiring them to wear a yellow badge. Or how about a register of landowners who are female, gay, black or disabled? This would be no more idiotic than having a register of foreigners.

The government intends to separate the register into a basic part and a published part. There is no requirement to confidentialise the part to be published. The government will demand the contact details of the foreigner, the value of their land and the purpose for buying the land. Such prying into private affairs is far from welcoming. The government has also left open the option of seeking and publishing the nationality of the foreigners. This would seem a distinct possibility, given that pandering to fears about a yellow peril is surely what this register is all about. Foreigners will need to report to the ATO the agricultural land they hold and also report their purchases of agricultural land. It is not hard to envisage how this register might be used. Imagine an increase in foreign ownership from, say, eight per cent to 10 per cent. It will be said that this is a 25 per cent increase and the country will soon be overrun by foreigners—to which, I might add, the Aborigines have an obvious rejoinder. Of course, nobody mentions that many of those foreigners from New Zealand rather than a country where the people do not look or speak like most of us, such as China.

Determining whether land is deemed to be agricultural land will be a bureaucratic minefield of arbitrariness and uncertainty. Land not currently used for agriculture but which could reasonably be used for agriculture will be covered, even if the land could only partially be used for agriculture. So if you could put a beehive on your land, it might be covered. Even a mine site could be deemed to be agricultural land if you expect the land to be eventually remediated. If you think your land somehow ceases to be agricultural, or if you think it somehow becomes agricultural, you will need to report the change to the ATO. People will need to report their agricultural land holdings to the ATO if they become a foreigner. When this will occur to an Australian citizen who is living overseas is not clear. When this will occur to a non-citizen permanent resident is also not clear—perhaps on their 165th day out of the country.

Foreigners who hold agricultural land will also need to report to the ATO if they cease to be a foreigner. When this will occur with an Australian citizen is not clear—perhaps when they come back to Australia for good. For a non-citizen, they will cease to be a foreigner on their 200th day in the country. So they will need to mark off their days on a calendar—just as a prisoner etches the days on their cell wall. This is not the most welcoming way to treat the skilled migrants we need for our 21st century economy. If you fail to report any of this to the ATO, you will be hit with a fine. It may come as a surprise that Australian citizens living overseas are treated as foreigners under our foreign investment restrictions. Aussies such as Mark Webber could easily be wrapped up in the red tape.

When Malcolm Turnbull announced his push to become Prime Minister, he said that a change in leadership was needed for our country's sake, that we cannot be defensive, that we need to respect the intelligence of the Australian people and that we need to seize the enormous opportunities the world offers. I agree. We cannot be defensive and we must reject the politics of fear surrounding foreign investment. We need to respect the intelligence of the Australian people, which means that if we cannot list a single cost from foreign investment then we should not argue for foreign investment to be restricted. Above all, we need to seize the enormous opportunities the world offers. And one of the greatest opportunities the world offers is the opportunity of foreign investment. This will add to our capital and infrastructure, improve competition and consumer choice, introduce new technology and global access, and boost jobs and skills.

I end my speech with an appeal to all senators: let these foreign investment proposals of the former Prime Minister quietly slide into your huge pile of un-enacted bills. They do not serve an Australia of free enterprise, individual initiative and freedom.

Rachel Siewert (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to make a contribution to the debate on 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. The Greens have long advocated a tightening up of the rules around foreign investment in agricultural land and, in fact, water—and I will come back to that in a minute. For Australia to be able to make informed and strategic decisions about agricultural land and water resources we must accurately track and consider each bid by foreign investors, particularly sovereign nations, to own it. This is something we are now finally seeing the government take up and start to enact in legislation. We took that policy to the last election because we know that food security and the protection of our prime agricultural land and water resources, and the capacity to continue to produce food in this country, is absolutely essential and we need to make sure that we have strong laws in place that enable that protection.

People who have been in this place for a period of time would know it is not often that I quote the former Treasurer, Joe Hockey, in this place. But I am about to quote from part of his second reading speech when he introduced this legislation—and I think this package of legislation was one of the last that he introduced. He said:

This legislative package shall ensure Australia maintains a welcoming environment for investment—but one that ensures that the investment is not contrary to our national interest.

These reforms shall ensure that from 1 December 2015, Australia's foreign investment framework is more modern, simple and effective.

Importantly, it will add integrity to the system, so that everybody plays by the rules. With integrity comes compliance.

By granting new compliance powers to the Australian Taxation Office (ATO), and additional powers to the Foreign Investment Review Board (FIRB), the government is ensuring that Australians can have confidence that our foreign investment framework will be effectively enforced.

Australians expect our foreign investment rules to be strong, effective and enforceable.

And that is certainly the feedback that I have had from constituents, from a lot of our members, and also from those in the farming community. He continued:

Our foreign investment rules have not been significantly revised since introduction in 1975, 40 years ago—

and we have seen a huge amount of change in those 40 years. I think we now have a global market that people never envisaged 40 years ago—

and they have not kept pace with the changes in global investment.

I divert from his comments here to say that, again, the laws have not only not kept pace with global investment but just not kept pace with change globally. The former Treasurer then went on to say:

The government recognises the changing landscape and has already taken active steps to enforce the existing rules and act decisively on foreign investment breaches.

He then went on to talk about the enforcement of penalties that had finally been occurring. The former Treasurer then went on to say:

The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 makes essential changes to simplify the system, strengthen the framework and ensure the rules are enforced.

It is not often that I quote the former Treasurer in this place. Those are exactly the sorts of things that have been needed for a long time. It is a great shame that, as the former Treasurer articulated, it has been 40 years since substantive changes were made to our foreign investment rules. So it is about time.

This package of bills—because it is a package of bills—changes the thresholds that determine when foreign investment needs to be reviewed, increases penalties for noncompliance, establishes application fees for foreign investment and establishes a register of foreign investment in agricultural land. The bills establish in legislation and accompanying regulations many issues that were previously dealt with in regulations, including issues around the much lower threshold for foreign investment review. We support measures to ensure that foreign investment is subject to rigorous assessment to ensure that it is in the national interest. It is one of the points that we have made very strongly in this place before and, also, whenever we have had an opportunity to talk about these particular issues. We know, as I said, it is absolutely essential to ensure that we do that assessment so that we are able to protect our prime agricultural land and water resources, which are critical as well. It means that we can protect our food security into the future. The public has a right to know the level of foreign ownership of agricultural land and water. I will reinforce that I have had constant feedback about this issue from constituents in Western Australia and, also, given that I am the agricultural spokesperson, from people around Australia.

The Greens economic policy points out that our aims are to increase the transparency and accountability of the Foreign Investment Review Board in making its decisions against the national interest test. The national interest test should be strengthened to incorporate national, ecological and social objectives. Again, we have had this policy intent for a long time, and I am glad the government is finally catching up, but it is a bit disappointing that the Labor Party is not on some of the elements of this legislation. The Greens believe that for Australia to make informed and strategic decisions about our agricultural land and water resources we must accurately track and consider each bid by foreign investors, particularly sovereign nations. The Greens support the creation of a review of foreign ownership of agricultural land to constantly track overseas purchases. We support the moves of the government to introduce a register for agricultural land. However, we see no reason why the government cannot commit here and now to also introducing a register for water holdings.

The government supports a lowering of the threshold for consideration of the national interest by the Foreign Investment Review Board for purchases of agricultural land by a foreign private entity, including cumulative purchases by the same entity. That is actually really important because, in the past, we have seen smaller purchases under the threshold by the same entity. If you look at this in a cumulative way, these become a much more significant purchase than a series of smaller ones. So we do need to make sure that we track those cumulative purchases.

However, we would also like the legislation to go further to include similar threshold tests for foreign purchases of water holdings. You have to look at this issue from the perspective of why we are doing this for agricultural land. The same reasons apply for water resources, particularly in the context of global warming and the impact of climate change on our water. In my home state of Western Australia, we have already seen a significant drying of our environment in the south-west. We are in the middle of about the third step down in rainfall decline in the south-west of Western Australia. We are going to be seeing much more erratic rainfall, much more episodic events and much more extreme event. This is all going to impact on our water resources. Globally, people know the value of water resources. Australia needs to recognise that and needs to be doing the same thing for water holdings and water resources as we are doing for agricultural land. For much of our production, as has been articulated in this place on many occasions, water resources go hand in hand with agricultural production. So why would you not make sure that you are doing the same for our water resources?

The Greens have long advocated for a stronger national interest test to be applied by the Foreign Investment Review Board for purchases of agricultural land and water resources. The Greens also support a hurdle being placed on the purchase of agricultural land and water by wholly owned subsidiaries of foreign governments, which is, again, a position that we have long articulated. The former leader of the Greens, Christine Milne, in particular, pursued these issues, and we are continuing to pursue these issues. The Greens have articulated frequently, particularly in the run-up to the last election, our vision for our agricultural sustainability into the future, and also our plan for food security. Of course, prime agricultural land and our water resources are absolutely critical to our food security.

Normally ignored as an asset class, the fragility and collapse of traditional investment sectors surrounding the global financial crisis saw a rapid increase in the number of financial actors investing in food commodity trading and assets. With it came a rise in food price speculation. Such speculation focused on profit maximisation has added to food price volatility and separated food prices from real supply and demand.

There has also been a re-evaluation of the value of concrete assets associated with the food system as private investors wake up to the shrinking supply of arable land and fresh water and the implications of climate change. Again, we are seeing the impact of climate change and global warming being factored in by decision makers globally. Willem Buiter, the chief economist at Citigroup, pointed out the new attitude from the financial sector when he stated:

Water as an asset class will, in my view, become eventually the single most important physical-commodity based asset class, dwarfing oil, copper, agricultural commodities and precious metals.

The rapid accumulation of land and water by the financial sector is concentrated in the developing world and is now causing significant concern. The purchased agricultural land is being used to grow food for export to other markets as part of the food security of wealthy countries reliant on food imports that now see trade exposure as an unacceptable risk and to grow crops to meet other demands such as for biofuels. Again, this highlights the need for Australia to upgrade its laws and to take account of global markets and global expectations.

Because of the loss of access to local land and water, increasing food insecurity and the sometimes forced removal of local farmers, this trend in the global south has been termed 'land grabbing'. Oxfam has shown that in the last decade an area of land eight times the size of the UK has been sold off for this new interest from financial markets. It is enough land to feed one billion people. While blatant land grabbing is not occurring in Australia, what is happening is a significant surge in purchasing of our agricultural land and water by foreign companies and countries. Recent Senate inquiries have heard that foreign companies such as the Hassad Australia company of Qatar have explained that, as their country is wholly reliant on food imports, they now have a specific policy of acquiring land and water in countries like Australia in order to grow food and send it home.

Australia's policy settings do not reflect the new reality of foreign purchases of agricultural land and water for both domestic food security and asset speculation purposes. We do not maintain a register of foreign agricultural land and water purchases. There is no mandatory application of the national interest test to such purchases, and the threshold for any consideration of potential implications was $250 million until only towards the beginning of this year, when the government acted to reduce it to $15 million. It is now, of course, incorporated into this legislation. For far too long that asset threshold was far too high, with governments—and I say 'governments' because it is both conservative and ALP governments—not acting to address that specific issue. It has been addressed due to persistent efforts by the community and by the Greens and those who are paying specific attention to these issues and who understand the new geopolitics of food. It is part of that change that I was talking about that has occurred over the last 40 years. Things have moved on, and I think Senator Leyonhjelm made some comments previously about our agricultural sector being stuck in the past. No, this is about what is happening now and into the future. This is bringing Australia up to speed with the global geopolitics of food. This is bringing Australia into the future in terms of how we look at food security.

If you look broadly at the global context, countries that rely on imports to feed their people are increasingly buying land and water in other nations to grow food, as they are concerned about the impacts of climate change and global warming on food availability and price. Multinational corporations have also realised the value of agricultural land and water and have begun investing heavily in these assets across the world, as they can see there are large profits to be made if they control the means of producing food. That is absolutely true. As a country with a strong agricultural sector and as one that is constantly adapting to both local growing conditions and the global context, Australia is one of the countries attracting the interest of foreign buyers. Yet our laws on foreign investment in agricultural land and water have been lax up till now, and we do not keep accurate records to track levels of foreign ownership. As I said, up until very recently only purchases of more than $250 million were subject to the national interest test by FIRB, the foreign investment review board. On top of that, FIRB is not required to take into account cumulative purchases by the same foreign entity that comprise $250 million or more. This legislation is way past time.

While foreign investment is important for Australia, we appreciate that it is critical that we have much clearer information and a picture of what is happening and a stronger national interest test that is applied to the purchase of such vital assets as our agricultural land and water, particularly in this time of growing food insecurity globally. Other countries with significant agricultural assets, including the US, New Zealand, Argentina, China and Brazil, have all placed restrictions and greater levels of scrutiny on foreign land purchase. This is not Australia being an outlier; this is about the protection of our valuable agricultural land and water resources. I keep adding water resources because we need to be doing the same thing for them. We need to have an idea of how much of our water resources are foreign owned. The Greens want to ensure that we have a balanced approach to our consideration of foreign investment in our essential land and water. These are essential assets for our country.

Climate change is going to have an impact on our climate; that impact and our growing population are going to have a significant impact on global production of food. It is essential that Australia is assured of its food security, and of how we are looking after our prime agricultural land and water resources.

My colleague Senator Whish-Wilson has outlined the Greens' position on this legislation and the need for some amendments to this legislation. I look forward to hearing the committee debate on this very important package of legislation.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

Firstly, I would like to thank those senators who have contributed to this debate. This package of bills will make important changes to strengthen the integrity of Australia's foreign investment framework, ensuring Australia maintains a welcoming environment for investment that is not contrary to our national interest. These reforms will ensure that, from 1 December 2015, Australia's foreign investment framework is more simple, modern and better targeted to changing demands and community expectations. With this package of bills, the government is implementing its commitment to increase security and transparency around foreign investment in agriculture, whilst also responding to concerns raised by the House economics committee that a lack of compliance in enforcement of the residential real estate rules is undermining the overall integrity of the foreign investment framework. These changes will deliver a robust regulatory framework, increasing community confidence and providing a predictable and welcoming environment for investors.

The Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 represents the most significant overhaul of the Foreign Acquisitions and Takeovers Act 1975 since its introduction 40 years ago. It provides essential changes to simplify the system, strengthen the framework and ensure the rules are enforced. It introduces additional and stricter civil and criminal penalties to ensure foreign investors and intermediaries do not profit from breaking the rules. The accompanying transfer to the Australian Taxation Office of responsibility for regulating foreign investment in residential real estate will further enable stronger enforcement and audit and compliance with the existing rules. The bill also enables the lowering of screening thresholds for investment in Australian agriculture to ensure significant investments in this sector are scrutinised.

The Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 introduces fees on all foreign investment applications from 1 December 2015. Fees on foreign investment applications will ensure Australian taxpayers are no longer funding the administration of the system, while providing additional resourcing to Treasury and the Australian Taxation Office to improve service delivery for investors.

Finally, the Register of Foreign Ownership of Agricultural Land Bill 2015 complements these changes by establishing a register of foreign ownership, operated by the Australian Taxation Office. Foreign investors are required to register essential information about their existing holdings and subsequent acquisitions of Australian agricultural land, providing greater transparency around foreign investment in agriculture. I should reiterate that these changes are about welcoming essential foreign investment that is not contrary to our national interest—investment that strengthens Australia's economy, creates new jobs and unlocks innovation.

With this package of bills, we are fulfilling our commitments to increase scrutiny and transparency around foreign investment, reduce red tape and ensure Australia is open for business. I commend these bills to the Senate.

I ask that the question on the second reading of the bills be divided.

John Williams (NSW, National Party) Share this | Link to this | Hansard source

That is fine. I can make a decision on that.

Nigel Scullion (NT, Country Liberal Party, Minister for Indigenous Affairs) Share this | Link to this | Hansard source

I move:

That the debate on the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 be adjourned.

Question agreed to.

Debate adjourned.

Ordered that the resumption of the debate on the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 be made an order of the day for the next day of sitting.