Treasurer Jim Chalmers speaks on foreign investment reform

Treasurer Jim Chalmers speaks on foreign investment reform

SARAH FERGUSON, PRESENTER:  Treasurer, welcome to 7.30.

JIM CHALMERS, TREASURER:  Thanks very much, Sarah.

SARAH FERGUSON:  You’re delivering a major economic speech tomorrow at a foreign policy think tank much in the way that the US national security advisor Jake Sullivan did last year. Are you proposing a significant rewrite of foreign investment rules based on national security?

JIM CHALMERS:  In short, Sarah, I am and one of the reasons why I am delivering this speech at the Lowy Institute tomorrow is because this third budget that we’ll hand out two weeks from now will have the usual emphasis on responsibility, on fighting inflation in the here and now, but there’ll a much bigger emphasis on economic security.

And that’s because we recognise the world is changing, the pace of that change is accelerating. We need to make sure that we are attracting investment, private investment and public investment as part of A Future Made in Australia and foreign investment has got a role to play there so long as it is in the national interest.

SARAH FERGUSON:  So my question was a significant rewrite of foreign investment rules to which you answered yes. Does that mean that you’ve identified specific existing projects which don’t line up with our national security interests?

JIM CHALMERS:  No, the focus is more forward-looking than that, Sarah and what I’m intending to announce tomorrow is a major overhaul of our foreign investment framework in three ways.

I want to make it stronger so that it’s more robust, that we are imposing much more scrutiny on investments which may not be in our national interest.

Secondly, I want to make it more streamlined for that less risky investment, investment that we trust.

And thirdly, I want to make it clearer and more transparent.

SARAH FERGUSON:  Well, give me some examples because you already have existing powers that you used last year against a Chinese businessman. How much further will this policy go?

JIM CHALMERS:  What this new policy would do is when we get an investment bid, we will categorise it determined by the amount of risk we think it poses. If it is low risk, it will get the streamlined treatment much faster than before.

If it is higher risk, it will get more scrutiny, stronger, more robust examination to how it relates to our national interest and some of the things that we are worried about will be familiar to you, Sarah.

Where we are worried about losing control of supply chains, where we are worried about losing resilience, where there is the capacity for interference and a whole bunch of other tests that we apply to foreign investment and what is happening right now is we’re treating most investments more or less the same and that’s gumming up the system.

We’re spending a lot of time examining proposals which are low-risk and that comes at a cost and so what I want to do is I want to substantially strengthen the foreign investment framework in this country.

Foreign investment can be a force for good if it’s in our national interest and I want us to be much better at screening out the less risky investment so that we can devote our time and energy to the more risky investment.

SARAH FERGUSON:  Let’s talk the risky investments. You just used the word interference, risk of interference. What you mean by that?

JIM CHALMERS:  Obviously if a supply chain or an industry is controlled more by overseas interests, it has the capacity to be manipulated, to be interfered with.

In some cases, the most extreme cases, to attract sabotage and espionage or some of those sorts of things and so we need to be very careful about that particularly in our critical industries whether it is critical minerals, critical data, critical infrastructure, these are the sorts of things that we are especially attentive to and so where there is investment in sensitive areas or in sensitive places, or sensitive industries, people can expect that to attract much more scrutiny.

SARAH FERGUSON:  Now of course we are talking about foreign investment but largely of course we are looking at the threat coming from China when it relates to Australia and obviously particularly in relation to critical minerals and energy transition, but here is the question. The Canadian Government when they reviewed this set of laws in Canada ordered the disinvestment of three Chinese companies. Is that what you’re proposing here, similar prohibitions on state-owned Chinese enterprises?

JIM CHALMERS:  Well, first of all, the regime in Australia is already a bit tougher for state-owned enterprises and I think that’s appropriate. I don’t intend to change that when it comes to the zero threshold and the like, that’s an important part of the current framework that we are looking to enhance and improve.

I’m pretty confident when people see the full suite of this overhaul tomorrow, they will see that we have been very, very attentive to making sure our framework is as robust as it can be, not because we are focusing on one country necessarily or another.

The tests that we apply to investments apply equally to investments from all parts of the world, but we will make it more robust, we will make it stronger and we will make it easier or more informed, better informed to imply some of those retrospective tests if we need to.

SARAH FERGUSON:  You are talking about boosting the ability of Treasury officials to make on-site visits to critical projects. How would on-site visits by officials uncover security issues?

JIM CHALMERS:  Well, it’s just one of a suite of tools that we want to make more substantial when it comes to the scrutiny on foreign investment.

So on-site visits are part of it but also the broader compliance story, sometimes when foreign investment bids are approved in fairness by governments of either political persuasion, there are a series of conditions imposed on that.

We want to make sure that we’ve got the resources to actually enforce those conditions and some of those will be physical, will require an on-site visit, some of them will be financial or the structure of ownership or the structure boards and the like.

And so a big part of what I’m announcing tomorrow is about how do we make sure when we do impose these conditions, they are actually complied with.

SARAH FERGUSON:  And would you be sending security officials from ASIO for example to accompany those Treasury officials because an on-site visit at a company that is digging a rare earths out of the ground, it is very hard to imagine a Treasury official can make an on-site visit and discover anything crucial.

JIM CHALMERS:  I’m a bit reluctant to get into those kind of operational issues. Primarily this is the focus of the Foreign Investment Review Board, a great group of people, very well supported by the Treasury, and it won’t surprise your viewers to know that they consult very closely with our various agencies across the government and what this is about more broadly, this foreign investment reform that I’m announcing tomorrow, is making sure that that coordination is as good as it can be, as efficient as it can be, as robust as it can be.

The actual operationalisation of that is a matter for the relevant officials.

SARAH FERGUSON:  Now in the case of these new rules and I haven’t asked you yet whether you’ll need to legislate as well, I’ll come to that in just a moment, but are you talking about future projects or also existing projects?

JIM CHALMERS:  Well, first of all, I can answer the question about legislating. We don’t need to legislate the changes I’m announcing tomorrow, that is easily enough dealt with.

On the prospective versus retrospective, my predecessor to his credit gave treasurers more power to look at deals which had already been struck and go back into those, if that’s necessary. I supported that at the time, and I support that now.

But what we are most fundamentally talking about now is getting the regime right for the future.

We can enforce compliance, we can go back into those deals, we are enhancing actually in these changes I’m announcing tomorrow, some of those powers.

But fundamentally, it’s about looking forward. It is about how do attract more, less risky investment and how do we better screen the more risky investment because if you think about A Future Made in Australia, you think about our capacity to be a renewable energy superpower, you think about the future of our economy.

It is going to rely on hundreds of billions of dollars of private investment and so we need to make sure that that is in the national interest, foreign investment can be a big part of our national economic success but only if it’s screened robustly and that’s what I intend to do.

SARAH FERGUSON:  Just on the question of call-in powers, because I think you retain a 10-year call-in power over these new projects; are you talking about extending that call-in power or beefing it up?

JIM CHALMERS:  I’m talking about making that power more robustly applied and enforced. One of the things that has concerned me and clearly it concerned my predecessor because he took some steps here, is worried about once we sign off on a foreign investment proposal, we are worried about policing the conditions and we’re worried about when that investment changes.

No investment stays exactly the same over a long period of time and so, any normal self-respecting country like Australia should have the ability to go back into those deals, if that’s necessary and what the changes I’ll announce tomorrow will be about beefing that up, as you say, but also having a much more robust information base to make those kinds of often difficult decisions.

SARAH FERGUSON:  We’re talking principally about China here. I just want to raise something that Don Farrell said, the Trade Minister in November, he said, “There were no proposed changes to China’s investment in Australian critical minerals”, and (quote), “That’s not going to change.” Is Don Farrell on board with these changes?

JIM CHALMERS:  Of course. We’ve done this in a really methodical way, a really consultative way and the point that Don is making, I think, is the point that I made a moment ago which is our foreign investment regime is non-discriminatory, the tests apply equally to investment no matter where it comes from around the world.

SARAH FERGUSON:  So he was speaking there on sidelines of APEC summit, so these were not comments made off the cuff. He said we need the investment including from China. Will you now be treating all investment from China differently?

JIM CHALMERS:  The tests that we apply are who’s making the investment? So state-owned enterprises, obviously attract a different level of scrutiny; how they are making that investment, the structure of the deal and in what industries they’re investing in, and those tests apply across the board whether it is China or Singapore or Canada or other places where we get a lot of interest, a lot of foreign investment.

So the point that Don is making is the point that I would make, our foreign investment regime is non-discriminatory, we welcome investment, if it is in our national interest, but we need to make sure that we are screening that robustly and that’s why I’m strengthening the regime.

SARAH FERGUSON:  I just want to ask you about taxes. You are also talking tomorrow, I understand, about ensuring investors pay their fair share of taxes. What specific projects are not delivering the returns they should?

JIM CHALMERS:  One of the things you notice, Sarah,I get hundreds of foreign investment bids come over my desk as do my colleagues, Stephen Jones and Andrew Leigh and one of the big things that we pay a lot of attention to is the structure of the tax arrangements for these bids and what has become clear to us over the last couple of years is that we need to make it much clearer to investors, potential investors, what we expect from them when it comes to their tax obligations here in Australia.

And so, what I will be releasing and working up initially tomorrow but over the course of the next couple of months is much clearer and more transparent tax guidance so there is a bit less of the back and forth between decision-makers and the Foreign Investment Review Board and the bidders, trying to understand what their tax obligations are.

If we can clear that up, we can tidy that up and I think that’s a really important thing.

SARAH FERGUSON:  Jim Chalmers, thank you for coming to talk to us and particular on this fascinating subject. Thank you very much indeed.

JIM CHALMERS:  Thanks for having me back, Sarah.

SARAH FERGUSON:  Now to discuss what else happened in politics today, I’m joined by chief political correspondent, Laura Tingle.

Laura, we are not the first country in the world to reframe economic policy as a national security issue. What do you think the response will be to the Treasurer doing it?

LAURA TINGLE:  I’m presuming you’re thinking what will be the response from China, Sarah, but I think this is on a continuum, the Chinese might make a fuss but there really isn’t anything explicitly designed to target them.

I think the interesting thing here is if you think about the context of this and the history, we started with a position where I think it was the Rudd government who knocked back a fairly significant mining deal years ago and everybody had conniptions and thought it was going to be the end of the world.

But I think it’s that critical infrastructure issue that is at the heart of this and of course, while the Treasurer is saying to you in that interview, it’s all about the future, in fact, the horse has bolted on this.

So much of our critical infrastructure in terms of electricity and energy supplies as they currently are structured are already owned by foreign investors and the sort of language that the Treasurer is using, I think points to the fact that what has happened in the past is that for example, a Canadian or Singaporean superannuation fund equivalent will have bought into these critical infrastructure areas before we thought that they were particularly critical and then, have eventually been on sold to the Chinese or to other interests which has ended up alarming the government and security agencies.

So I think what he’s talking about is really having better mechanisms for finding out who actually owns this stuff at any given point of time and being able to intervene to potentially stop some of those changes of ownership that might happen on a second or third round effect.

SARAH FERGUSON:  Now obviously, there is a deeply serious point he is making here about the way we think about the economy and the way it relates to national security but just on those points that you have just raised, how do you think business will respond given that there may be some tightening of foreign investment particularly the idea of making it, giving him more powers to intervene after the fact for 10 years?

LAURA TINGLE:  I suspect business here will be pretty pragmatic about it, Sarah. You can see in the Treasurers language, there is sort of offsets here. He is talking about strengthening the regime, but he is also talking about streamlining it which business always like and making sure it’s transparent.

So, I think if the Government can persuade business that they will actually be winners out of this because other deals will be handled much faster and that there will be more mechanisms for dealing with foreign investment applications, they will probably accept that quite happily.

SARAH FERGUSON:  Now moving to the other business of the day, the Prime Minister was in Alice Springs, two weeks since the end of the curfew, why was he going, what was trying to convey by his presence?

LAURA TINGLE:  He’s been criticised a lot, Sarah, for the fact that he hasn’t been there since January last year so I think he was basically going up there to be seen to be there.

He made a few announcements about money including extending a boost to police funding, but I think if you think about his visit to Alice Springs in terms of Indigenous affairs policy and how it has been run post Voice, it’s still a little bit arbitrary or a bit piecemeal, a bit of money here for education, a bit for health, we are waiting to see a broader strategic approach to the issues that come up in Alice Springs.

SARAH FERGUSON:  And do we think we are going to see more money in the budget for Indigenous policies given that we have had that not quite vacuum but something like it?

LAURA TINGLE:  It’s not being really featuring high on the list of priorities at this stage, I don’t think, Sarah, but it’s possible.

SARAH FERGUSON:  Now just briefly and I hate to do this to you when I say briefly when I’m about to ask you about quantum computers, so bear with me but there was an announcement today about funding for a quantum computer commercial use thereof, PsiQuantum. How do we go separating the value of these ideas and these investments from the political interest, for example, that this is located in Queensland?

LAURA TINGLE:  Well, it is difficult because of course, we’re both quantum physics experts, Sarah, and this is all about fusion based architecture through a photonics approach which encodes qubits into particles of light and that’s qubits with a Q, not C.

But I think the questions here are, look, they are saying it’s about bringing Australians home which there is always the brain drain argument. So they are talking about bringing Australian people home to do this, Australians have been at the forefront of a lot of quantum work over the last few decades so you can say that that is fine.

I think there will be questions about this however. It’s $1 billion, not all form the federal government and it’s been an expression of interest, some of the locals are grumbling about the fact that this was just essentially done without too much competitive tender elements as far as they are concerned but I think it’s been put in Queensland because the Queensland Government is putting some money up for it.

SARAH FERGUSON:  Thank you, I will send myself to quantum school. Thank you, Laura.

LAURA TINGLE:  Thanks Sarah.

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