Kevin Rudd’s off-the-cuff comments on foreign investment during the Rooty Hill people’s forum with Tony Abbott on Wednesday were hardly prime ministerial, so it’s a good thing his Labor colleague and agriculture minister Joel Fitzgibbon shut them down almost immediately.
Rudd said he was anxious about an ‘’open-slather’’ approach to foreign purchases of Australian agricultural land and that the country needed to adopt a more cautious approach. He expressed a preference for joint ventures rather than outright purchase by foreigners, and said he wasn’t ‘’quite as free market as Tony on this stuff’".
Fitzgibbon was quick to say that Labor had no plans to increase scrutiny of foreign buyers or force them into joint ventures with local investors and that Labor was keen to boost public confidence in foreign investment.
It says something about how left-field Rudd’s musings were that Bob Katter accused him of stealing his policies (Familiar problems for Rudd-on-the-fly, August 29).
Abbott, whose Coalition plans to lower the threshold for Foreign Investment Review Board scrutiny from $244 million to $15 million and develop a register of foreign agricultural land purchases (sops to his National Party colleagues), was otherwise welcoming of foreign investment, saying it would be shocking if there were a "colour bar" on investors. He also made the very obvious and practical point that while foreigners could buy land, they couldn’t actually shift it offshore.
While there have been some shifts in foreign investment policies over the years, notably the introduction of a policy that FIRB would automatically review any and all transactions involving foreign state-owned enterprises (a response to the tide of Chinese state-owned enterprise investment in resources during the ramp-up of the resources boom), there has generally been a consensus among the two major parties that foreign investment is both desirable and necessary. As it is.
Throughout the nation’s history, we have been reliant on foreign investment and it has played a major role in developing the economy and the resources within it.
While there are political sensitivities around agricultural land that Rudd was presumably seeking to exploit, foreign capital is going to be vital if Australia is to take advantage of the vast opportunity in agricultural commodities that is emerging as Asia’s economies continue to shift up the development curve.
Fitzgibbon referred to an ANZ-Port Jackson Partners report earlier this year, which said about $600 billion of new investment would be required by 2050 if Australia was to properly capitalise on those opportunities.
It is also probable that, separate to the capital requirements, it will be necessary to protect access to those markets by allowing the customer nations to invest or co-invest in the agribusinesses involved. This would be similar to the investments that Japanese trading houses made in the Pilbara and the North-West shelf, or that Chinese investors have made in the Queensland LNG plants, that helped develop those resources and facilitated access to markets. For that matter, UK and US capital has helped develop the agricultural sector and continues to do so.
The Coalition policy of lowering the threshold for FIRB scrutiny is a gesture to rural protectionists and xenophobes, but has no practical import. FIRB has rarely recommended rejection of an application and only sparingly imposed conditions. There are some potential investments that could raise national interest sensitivities, but there aren’t many of them. Creating a register of foreign rural land purchases, which appears to be the policy of both major parties, is a sensible data collection policy that might help inform the inevitable debates that will develop as foreign investors become more visible in the sector.
Rudd’s policy was a populist thought-bubble for perceived political advantage. But given that he is still the prime minister, it sends a wrong and ugly message to the region.
Australia wants foreign direct investment and it wants access to foreign markets. Our leaders need to be careful that in the heat of a domestic election contest, they neither deter than investment nor encourage those whose opposition to that investment is formed from a base kind of economic nationalism or simple xenophobia.