Labor to fast-track foreign investment to help fund future industrial policy
Foreign investment approvals will be made quicker but greater scrutiny will be placed on potential risks as Australia tries to balance economic and security interests, treasury Jim Chalmers will say on Wednesday.
Treasury will set a target to process half of foreign investment cases needing approval within 30 days after from next January, Chalmers will tell the Lowy Institute in Sydney. It will also seek more funds from abroad to support so-called build-to-rent housing ventures and the energy transition off fossil fuels.
The budget, though, will also set aside more funds to screen foreign investments in critical infrastructure, minerals and technology. Projects also involving sensitive data sets and those to be located near defence sites will also be examined more closely “to ensure that all risks are identified, understood and can be managed”, he will say, according to a copy of his speech.
In an interview with the ABC’s 7.30 program on Tuesday, Chalmers denied the foreign investment reforms were at odds with comments by the trade minister, Don Farrell, in November that Australia was not proposing any changes regarding Chinese investment in critical minerals.
Chalmers said even after the changes, Australia’s foreign investment regime would remain “non-discriminatory” with the same rules applying regardless of the source country. He said Australia welcomed investment that met the national interest and proposals must be screened “robustly”.
In his speech today, Chalmers will say that the nation was facing challenges “vastly different” from a decade ago. These are marked by “heightened geostrategic competition, an international system under continuous pressure, demographic change, greater risk of major shocks to supply chains, and a restructuring of global trade from the net zero transformation”.
Australia’s economy has long relied on foreign investment to bolster the economy even as domestic sources, such as the $3.7tn superannuation industry, continue to grow.
Competition for funds and technology is likely to intensify as government such as the US and Europe stump up many billions of dollars to foster decarbonisation industries such as batteries and renewable energy often to catch up with China’s advances.
According to Chalmers, the International Monetary Fund found 18,000 instances of subsidy intervention by China, the US and Europe between 2008 and 2021. It also identified a further 2,500 cases last year alone, with those three economic blocks accounting for about half.
Those trends supported the Albanese government’s so-called Future Made in Australia investments, such as in critical minerals processing and even solar photovoltaic panel production. The 14 May federal budget is likely to contain more funds for such projects.
“We can’t replicate or retrofit the approaches underway elsewhere,” Chalmers will say. “But it would be preposterously self-defeating to leave our policies unchanged in the face of all this industry policy taking shape and taking hold around us.”
Australia had to become “indispensable” to the global decarbonisation efforts. That could only happen, though, “if we align our economic and security interests more tightly, and only if we invest and engage, not just protect or retreat” he said.
The government would also spend more on the treasury’s compliance team to “better monitor and enforce” conditions imposed on deals by the foreign investment review board. “This team will also support the use of my call-in power to review investments that come to pose a national security concern in time,” he said.
The government would also release updated guidance about tax arrangements to ensure foreign companies pay their way.
Foreign investors will be allowed to buy established build-to-rent properties to foster demand and provide incentives to construct new projects.
Direct and portfolio foreign investment reached about $3.5tn in 2023.
As for the pending Future Made in Australia legislation, the government plans to set five key tests for its intervention, ranging from whether the investment is in an industry that the country can be competitive to its contribution “to an orderly path to net zero”, Chalmers said.
Other tests include the boosting of skills and support to regional Australia, and whether it improves “Australia’s national security and economic resilience”.
However, the private sector will have to play a key role in such investments and “deliver genuine value for money for government”, he said.
Direct and portfolio foreign investment reached about $3.5tn in 2023.
