11 August 2016
Transcript - #2016102, 2016

Press conference, Brisbane

SUBJECTS: Foreign investment applications for the 99 year lease of Ausgrid; 2016 Census

TREASURER:

[Start of audio] ….a lease of Ausgrid received in the current form proposed to the Government. Let me be clear, the process here is that you have a preliminary decision that is what is required, the bidders are advised and they have a period of a week then to respond. So, this is the preliminary decision of the Government. Now, Ausgrid’s footprint includes critical power and communication services that Ausgrid provides to businesses and Government. The national security concerns, other country specific and relate to the transaction structure and the nature of the assets. At this stage the Government has not indented mitigations that would appropriately address those concerns. These issues affect all current applications. I’ve informed the Ausgrid bidders of my preliminary view that their foreign investment proposals are contrary to the national interest and I have provided them with the opportunity to respond to my concerns in accordance with the [inaudible] processes that I have just outlined to you. That will require a final decision to be made once I have received those responses from bidders and consider them.

I would like to congratulate and note the extensive engagement that has occurred with the New South Wales Government through 2015 and 2016 on this matter also involving of course the Foreign Investment Review Board and the Treasury. I would like to commend New South Wales for their cooperation throughout this process and note the relationship between FIRB and New South Wales has been one of mutual respect and high degree of professionalism and I thank in particular the Treasurer Gladys Berejiklian and the Premier Mike Baird as well as the Officers of the New South Treasury and the officers of our own Treasury.

I would also like to commend the New South Wales Government for their involvement in the asset recycling process. New South Wales has been a leader in this process which will see important investment in new infrastructure for the citizens of New South Wales. Notwithstanding my preliminary decision today funds from the Commonwealth’s Asset Recycling initiative will continue to be available to New South Wales. We will collaborate with the New South Wales Government through the next stage of this process to ensure that the benefits of this new infrastructure investment are realised for the New South Wales community.

I am happy to take questions on these matters but I would ask you to understand that given their sensitivities I am limited in what further comment I can add to what I have already outlined.

QUESTION:

[inaudible] concerns of the Chinese around the census attacks?

TREASURER:

Why don't we just stick with this matter first? Then I'm happy to get to those other issues.

QUESTION:

Do you believe some of the hurdles you've put up will be surmountable? Can they be overcome in the next week or so?

TREASURER:

The process is for them to respond. What I've said is that the national security interests involved in this matter and this transaction, as proposed to the Government, that we have worked very hard and collaboratively to identify possible mitigations and we have been unable to identify mitigations which we would believe would be suitable. That has involved extensive effort, and so those issues are real, they're matters, obviously, of national security interest to the Commonwealth and elaborating on those obviously would not be in the national interest either.

QUESTION:

What impact could this have on Mike Baird and his budget, essentially, which rests on the sale of this infrastructure?

TREASURER:

I'll leave that to the NSW Government to address those issues. Their advice to me is they are proceeding with these matters, and we will continue to work with them on these matters. I'm happy to stand corrected, but it's my understanding that the current NSW Government budget, as handed down by the Treasurer, did not include a provision for this particular transaction. But that is a matter for the NSW Government. But they remain committed to their program in this area and, as I've just said, I think it's a very worthy program for them to realise assets that enable them to invest in new infrastructure. Infrastructure investment in Australia is one of the critical challenges we have for our economy and I think the leadership shown by the Baird Government and Treasurer Berejiklian is exemplary, and I would encourage others to follow in their footsteps.

QUESTION:

There is a pretty big concern that there were no other bidders apart from these two Chinese-backed companies for these assets. So you are talking up the State Government about how great it is they are selling assets to build infrastructure, if there are no other buyers and you have just knocked back the two biggest bids that is going to have flow-on affects?

TREASURER:

I don't accept the presumption of your question. This has been quite a long process, and there have been many that have been involved along the way. The NSW Government have run an exemplary process on this issue, as I am advised, and I am sure they will continue to conduct themselves with those high standards.

QUESTION:

How much consultation did you have with the NSW Government over this because the potential sale to a Chinese buyer was a big thing in the NSW election. Reverend Fred Nile ran quite heavily on this. Did you [inaudible] speak with Gladys Berejiklian and Mike Baird saying this may be an issue moving forward?

TREASURER:

I've been Treasurer since September of last year, but the Commonwealth has been actively engaged with the NSW Government as they've sought to go down this path and this process. The Foreign Investment Review Board process is one that requires the consideration of all of these national interest issues, and you'd be aware that, after becoming Treasurer, I appointed David Irvine, the former head of ASIS and ASIO to sit on the Foreign Investment Review Board, as well as David Peever, a senior executive with Rio, as well as having been involved in the first principal review of the Defence White Paper. So, these are national security issues in particular – both of those gentlemen are not strangers to these issues. So, I think having the experience of those types of people as part of the FIRB process has added to this, but when we assess these applications; and I stress we do this on every case – case by case, and we pursue the national security issues to the nth degree, as I said on the weekend, and that's what we've done, that process has not enabled us to identify suitable mitigations to protect against the national security issues in this case. And that, at the end of the day, is paramount.

QUESTION:

Chinese interests own large slabs of gas and electricity and [inaudible] in other states. Why are you pulling up the drawbridge now?

TREASURER:

That is not the case, as you have suggested. What we have done is I have given a preliminary decision on this transaction for this particular asset, and it is the national security issues associated with this particular asset.

QUESTION:

What is it about this particular asset that you're concerned about? Why not...

TREASURER:

The only person who's security-cleared in this room to be able to hear the answer to that question is me.

QUESTION:

What kind of message do you think this decision sends to other foreign investors who may be considering investing in Australia?

TREASURER:

That we have a robust process for examining foreign investment in Australia, that we welcome foreign investment in Australia, and we continue to do that. In 2013-14, some $160-odd billion worth of investments were approved in Australia, and we continue to approve investments where they are deemed to be not contrary to the national interest, and that is across a broad range of countries. We will continue to actively engage with the rest of the world, because foreign investment capital is important to Australian jobs. Australian jobs and Australian businesses depend significantly on the injection of foreign capital into the Australian economy. And to resist that in unreasonable circumstances would cost Australian jobs. It would cost Australian wages. It would cost Australian livelihoods. That is why we do take a positive position on foreign investment in Australia – as the evidence shows over 100 years or more – we have done for a very long time. So, we remain positively disposed towards foreign investment. It features strongly in the agreements that we've been able to agree with other countries around the world – countries like the United States and the United Kingdom and others remain our predominant investors and holders in this country, and there are other countries who've increased their level of interest.

QUESTION:

The Premier of New South Wales had said, obviously, this sale and linked obviously with Transgrid as well, would mean better schools, better hospitals, including some in your electorate. Was this a difficult preliminary decision for you to make?

TREASURER:

Every foreign investment decision is a difficult decision. Every decision you make as a Minister, whether in my experience as Treasurer, as a Minister for Social Services looking after $154 billion a year of payments and other support which is provided to the most vulnerable of Australians, or particularly in my role as Immigration Minister, where there were many difficult decisions – they're all difficult. But you have a clear understanding of what the national interest is in each of these cases, and I always seek to act in accordance with my understanding of that. When it comes to foreign investment, particularly in an asset such as this, the national security issues are paramount. And I take my national security advice from those who know it best, and that is the agencies we have available to us to advise us on these matters.

QUESTION:

Can you spell out more of the security issues? What are they?

TREASURER:

No.

QUESTION:

Are they spying?

TREASURER:

No, I don't plan to get into those matters and, I really don't think you'd expect me to.

QUESTION:

Those discussions with State Grid and the other Hong Kong bidder about what potential conditions you would put on those sales and those conditions were deemed unacceptable by those companies and that's why there was no acceptance of any of those bids?

TREASURER:

No. I mean, what happens in this process is we look at the potential mitigations and potential conditions that can be put on these transactions – as we did on the Transgrid transaction. We put in place conditions on the Transgrid transaction that were unprecedented. And they were strong – very strong. And we stand by those conditions. I, on the transactions that I consider, impose a tax deed on every decision, which, if a company that is involved in one of these investments doesn't uphold the conditions of that tax deed, i.e. seeks to shift profits offshore to avoid paying tax in Australia, I can force a divestment of the sale. That is something I've done to strengthen the expectations of the Australian Government, of foreign companies, investors or others who are seeking to invest in Australia, that if you invest in Australia, if you operate in Australia, then you pay tax in Australia on what you earn in Australia, and you don't try and shift this offshore. That's why we've introduced the multinational tax anti-avoidance laws. That's why in the Budget I've outlined the new diverted profits tax to crack down on those types of multinational tax avoidance issues. So, whether it's on that scale of things or otherwise, we will put conditions on transactions which we believe can ensure that transactions are not contrary to the national interest.

QUESTION:

The Prime Minister had a discussion with Bob Katter in this very building after the election. Does this blocking have anything to do with Bob Katter giving his very vocal opposition to any potential sale of Ausgrid to Chinese investors?

TREASURER:

No.

QUESTION:

What's the difference between NSW's power distribution network and, say, the South Australian which is actually owned by [inaudible]?

TREASURER:

Well, again, they are issues which are germane to the national security issues that I've referred to.

QUESTION:

International security issues, while you can't go into it because of the clearance, have you made them clear to the bidders?  Otherwise, how are they meant to try and mitigate conditions?

TREASURER:

The issues of Australia's national security are only disclosed to those who are in a position to be cleared for that purpose. So I think that would contravene that.

QUESTION:

[Inaudible]

TREASURER:

Australia's national security is Australia's business, and it will always be Australia's business and it's something that we consider internally to protect that interest.

QUESTION:

How can they make acceptable mitigation?

TREASURER:

We will always act in Australia's interest to protect Australia's national security. That does not mean breaching that national security with others who obviously wouldn't have an expectation, let alone an entitlement, to be accessing that sort of information.

QUESTION:

The Prime Minister seems to be shifting the blame this morning for the census failure to the ABS, saying it was wrong over this. Is that really the right response? Shouldn't the Government be taking responsibility?

TREASURER:

The Government is extremely disappointed, as the Australian people are, about the disruption and inconvenience of the last few days in relation to what has occurred with the census. Now, the decision to move to an e-census was taken back in 2011. It was taken by the ABS at that time under the previous government, and indeed, in  the '13-'14 Budget, it was actually the previous government that put aside the appropriations, bringing forward appropriations to provide both the capital and recurrent funding that was needed to action that e-census decision that was taken by that previous government. We, in supporting the ABS since 2013 in that election, continued to implement those plans. There were capability reviews that were conducted on the ABS's IT systems, there was additional funding provided in the most recent budget of some over $270 million, and these agencies had been resourced to do this job. These agencies had conducted an extensive series of processes under various ministers, including those under the previous Labor government, to ensure that they would be ready for this day. Ministers have continued under the assurances that have been provided by those agencies for the processes they were given. Now, the failings of the other evening following the attacks of the other evening, which highlighted the weaknesses that presented – are very disappointing. All of those processes that were followed and the stress-testing that was conducted was intended to provide the assurance to the Government that the events of the other night wouldn't have happened. So, that takes us to the point of the systems failure that occurred after that attack. We are now working eagerly, particularly with the support of the Australian Signals Directorate, to ensure that today, that site should be able to be restored, and it is important that, once that has happened, that we continue to encourage people – and I would invite the media and others in the political domain to support that collection. It's important information. It helps the planning of important services and important decisions that have to be made by governments at every level. And the ABS, I have no doubt, will be re-doubling their efforts and their communications to encourage Australians to participate in that census. But there will be a thorough review into this, particularly into the actions of the service providers who were well-resourced to do the job that they were asked to do…

QUESTION:

Isn't the Prime Minister pre-empting that review by saying this morning that it's basically the ABS's fault?

TREASURER:

The ABS was running this program. You need to remember that the ABS is an independent statutory authority which has a series of independent powers. Those independent powers, for example, include the decision to move to an e-census. They include the decision to encourage all Australians to participate in the census electronically on one particular night. That's a decision of the statistician, for the reasons that they can go into. It is a decision of the ABS to decide about how long those records are kept, as it was on this occasion. So, they are an independent statutory authority who have those resources. They have a chief information officer. They are a capable, well-respected organisation with an unblemished record on data security for the census. An enviable record. And so, they have earnt that record, but on this occasion, there has been a serious failing. Obviously we'll be looking very carefully into the reasons for that. But in my own assessment in looking back over these issues – I mean, the tender process for the IBM contract was undertaken back in 2014. As I said, with resources provided for by the previous government, who set that chain in motion as to what the resource requirements would be to prepare for an e-census. This is a process that goes over five years. It goes over two governments. And the results the other night were completely unsatisfactory, and make us, frankly, pretty angry. Damn angry.

QUESTION:

Would you cancel the census if you don't get enough responses back? Would you put it on hold and try again? Also, would you look at maybe instructing the ABS, if you can do that, to not store people's names?

TREASURER:

On the first question, as I said yesterday with the Prime Minister, all of our advice, from the statistician, is that there is no compromise to the integrity, the statistical integrity, of the census, based on the events of the last 48 hours. That is why the ABS – both I and the Minister responsible and the Prime Minister – have instructed them to redouble their efforts when it comes -- and our own – to encourage people to engage in the census. That is the priority right now. That's what we need to focus on. Work the problem. We work the problem on the IT issue and we work the problem on encouraging Australians back into the census. And the success of that operation would mean that there would be no reason to do as you suggested. So, that's where our efforts are focusing. On the other matter, as I said, that is an independent decision of the statistician. So, that would require a careful consideration of where the powers of the government exist to override an independent statutory authority who make those decisions independently.

QUESTION:

Has the Government examined whether abandonment may be necessary?

TREASURER:

It's not a proposition that I've been advised has any likelihood.

QUESTION:

How confident are you on the ABS? Part of your job is allocating funding provided by data from the ABS. Given what we saw on Tuesday, how confident are you in the ABS?

TREASURER:

Well, I'm very disappointed, I think, is the first thing to say. I'm sure they're very disappointed too. I think they, and all the officers at the ABS, have worked very hard over the last five years to bring about what was a worthy initiative to move towards an e-census. That is a, I mean, I note the criticism made by the opposition of having an e-census, but they neglect to say that that decision was actually taken under their own government. But I think that was a worthy thing to pursue. Now, we are obviously very disappointed that, in the execution of that, despite what had been well-resourced and strong planning over a long period of time, that was the result that occurred the other day. Whether those failings were predominantly in the area of the service provider or in the agency itself or other matters, well, that's what the review is for. You can be very confident, given the elevated level of irritation and anger by the Prime Minister and I, and the Minister, that that review will do its job.

Thank you very much.