21 June 2017
Speech - #2017015, 2017

Foreign Investment Dialogue, Parliament House, Canberra

Check against delivery

Thank you for the introduction, it is great to be here.

There is no question foreign capital has allowed the Australian people to enjoy higher rates of economic growth, employment and a standard of living that could not have been achieved from domestic savings alone.

Therefore our door must always remain open to those that seek to invest in our future and deliver economic and social benefits to the nation.

But to give the Australian community confidence that we are acting in their best interest, such investment must continue to be made on our terms.

Our policy on foreign investment is to be open, transparent and sovereign.

According to the ABS, the primary source countries for the stock of foreign direct investment are the USA with more than $195 billion (24 per cent), followed by Japan at $91 billion (11 per cent) and the UK at $68 billion (9 per cent).

The Netherlands stands at $50 billion (6 per cent), while China at $42 billion, Singapore at $31 billion and Canada at $29 billion, are all around or below 5 per cent each.

The Foreign Investment Review Board data shows there was more than $240 billion of approved proposed investment in 2015-16, an increase of almost 30 per cent on the previous year.

And when we examine the FIRB data by industry, residential and commercial real estate, manufacturing and mineral exploration attracted the most foreign investment.

Without this critical foreign investment, production, employment and income would be lower across the board.

This is something the majority of Australians fully comprehend and appreciate.

In its 2017 annual poll released today, the Lowy Institute confirmed 78 per cent of Australians believe globalisation is “mostly good” for Australia, up 14 points since 2006. Two thirds believe free trade boosts their own standard of living and the Australian economy.

To encourage further investment, we need to create and sustain a globally competitive business environment.

And that starts and finishes with a company tax rate that at the very least is comparable to our global peers and major trading partners.

That’s why we have committed to cutting our company tax rate. We want to stimulate investment, create more jobs and drive economic growth.

As you would all know, at 30 per cent Australia’s company tax rate remains one of the highest in the world and significantly above the OECD average.

If we don’t act, we risk our businesses becoming vastly uncompetitive on the global stage as our trading partners and G20 countries have slashed company tax considerably.

In France the company tax rate is legislated to fall to 28 per cent by 2020 and under President Macron it is set to decline further to 25 per cent.

The United Kingdom is heading to 17 per cent, Singapore is already there and President Trump recently signalled his intention to slash the US company tax rate from 35 per cent to 15 per cent.

In putting our Bill before the Parliament, just two days after we delivered our budget, we made it clear that an uncompetitive business environment can be the difference between firms investing in Australia or choosing to invest elsewhere.

This fact is reflected in your own survey, with local CEOs nominating business taxation as the number one priority area for the Federal Government in making Australia a more attractive investment destination.

Our Budget measures both encourage investment and protect the national interest.

You cannot have one without the other. You need a balance to ensure we are attracting the right investment in the right industries, while not disadvantaging local firms.

This week we legislated to enhance our foreign investment framework to reduce red-tape and simplify the fee structure for investors.

And, again, I note that regulatory simplification was high on your agenda in terms of your CEO survey and government priorities.

Our amendments will reduce the requirement for investors to seek multiple approvals for similar low-risk transactions, amend the commercial fee framework to improve transparency and consistency, and improve the treatment of low risk commercial transactions.

These changes will take effect in just nine days – from 1 July 2017, and while investors stand to benefit, the changes will also allow the Government to better allocate resources to investments that warrant greater scrutiny.

These changes build on our landmark reforms to the framework in 2015 which established an application fee regime, penalties and clearer legislation.

Just as you need confidence in our foreign investment framework, so too do the Australian people. That’s why we have acted to strengthen our foreign investment rules.

Our housing affordability package included several targeted measures to increase housing supply for Australians and end tax breaks for foreign nationals. And like all our actions in the housing market, we are taking a measured approach.

As part of our plan, we will place a limit on foreign ownership in new developments.

We will introduce an annual vacancy charge to discourage foreign investors from buying residential properties and leaving them vacant.

And we will tighten the foreign investor tax integrity rules to reduce avoidance of capital gains tax on Australian property.

I also point out that the Government is moving to channel overseas investment into real estate where we need it most: affordable rental housing.

Foreign investors who invest in affordable housing will be able to secure generous tax concessions, including a bump in capital gains tax discount from 50 per cent to 60 per cent, and attract a withholding tax rate of 15 per cent on investment returns.

We are addressing concerns on the sale of critical infrastructure.

To better assess the national security risks in the proposed sale of critical infrastructure, we have established a Critical Infrastructure Centre.

The Centre will develop coordinated, whole-of-government national security risk assessments and provide advice to support government decision-making on investment transactions.

As you would appreciate, water, ports, electricity and telecommunications are our highest risk sectors and assets, and therefore, we will carefully scrutinise foreign investment in those sectors.

Now turning to the broader outlook, Australia’s continued economic strength has plenty to offer prospective foreign investors.

We have a highly skilled workforce, strong institutions and governance, and a growing, resilient economy.

The March National Accounts showed that real GDP rose by 0.3 per cent in the quarter, to be 1.7 per cent higher through the year.

Despite this modest headline growth — in part attributable to weather-related effects — in a display of resilience 17 of the 20 industry sectors in the economy grew in the March quarter.

Recent jobs growth has been very strong, with last week’s data showing that the unemployment rate has declined to 5.5 per cent – the lowest rate in over four years. Over the past year more than 232,000 of those jobs have been created - with almost two thirds of those being full-time jobs. More than 686,000 jobs have been created since the Government came to Office.

These successes are down to not just the Australians who went out there and got a job but also the businesses that had the confidence to employ them and pay their wages.

The May NAB Monthly Business Survey has again pointed to an upbeat business sector, which is experiencing some of the best conditions in recent years.

On the whole, the recent economic data underscores the importance of the choices we made in supporting more and better paid jobs and responsibly managing the nation’s finances.

Indeed, Australia’s economic performance continues to stack-up favourably with most advanced economies, including other major commodity exporters.

And, as the RBA statement said earlier this month ‘domestically, the transition to lower levels of mining investment following the mining investment boom is almost complete’.

As an aside, the Minister for Trade, Tourism and Investment, Steve Ciobo noted that, ‘our mining boom would not have happened without foreign investment to develop the infrastructure, expertise and supply chains around the world’.

So as a nation, we are in a good position to build on the hard-won growth secured in recent years and make the most of global optimism.

Global outlook

After remaining subdued for several years, global trade volume growth is starting to increase, and there has been some improvement in the outlook for business investment and industrial production in major economies.

Importantly, our major trading partners are set to continue outperforming the wider global economy, with our Asian trading partners in particular expected to grow strongly.

Chinese GDP growth has ticked up in early 2017, with particular strength in the industrial sector.

The United States economy is still performing well, with a continued economic expansion and an unemployment rate falling to 4.3 per cent, its lowest rate in many years.

India’s economy is also showing remarkable resilience and is expected to quickly recover from the recent slowing in growth, with upside for the Australian economy.

And then there is Japan, where an Olympics-fuelled boom is fostering strong growth in exports and investments, leading to the nation’s unemployment rate falling to levels last seen in in the mid-1990s.

All this bodes well for foreign investment in Australia, however, we also need to be mindful of the uncertainties.

As in indicated in the Budget papers, heightened policy uncertainty, for example, has emerged in several countries.

High levels of debt, potential financial imbalances and overcapacity in some sectors remain as risks to China’s economy.

And, Europe continues to face a range of persistent issues following the GFC and the European sovereign debt crisis.

Ladies and gentlemen, Australia welcomes foreign investment and in our region of the world we have a comparatively open approach.

As business leaders, you play an important role in making sure we never underestimate the importance of foreign investment to our national economy not mention our standard of living.

As I have outlined today, we are progressing several important policy initiatives and managing the economy prudently to make sure Australia remains an attractive destination for foreign investment.

At the same time, the Turnbull Government continues to take a case-by-case approach to ensure foreign investment is not contrary to the national interest.

Our foreign investment framework strikes a balance between maintaining our attractiveness as an international investment destination, while maintaining community confidence in foreign investment and protecting Australia’s interests.

Thank you.