Foreign investment into Australia will be overhauled to preference trusted investors over those with higher security risks, Treasurer Jim Chalmers has revealed.
The move is designed to lure funds for the recently announced Future Made in Australia Act, aimed at boosting local manufacturing and renewable energy development.
Akin to the U.S. Inflation Reduction Act, it is mainly supported by taxpayer-funded incentives and tax breaks.
Mr. Chalmers said the government was spending the same amount of time scrutinising both low- and high-risk foreign investment proposals, a situation the treasurer hopes to change.
“What happens right now is the system gets more or less gummed up by spending a lot of time and resources on low-risk proposals. We want to spend more time, effort, energy, and resources on the higher-risk proposals in some of our critical industries,” he told Sky News Australia.
He noted that national security risks have increased over the past few years as a result of increasing geopolitical tensions around the world.
“While we have a strong track record in attracting investment into Australia, we cannot be complacent,” Mr. Chalmers said.
“Our reforms will make Australia a more attractive place to invest, boost economic prosperity and productivity, while strengthening our ability to protect the national interest in an increasingly complex economic and geostrategic environment.”
Of particular concern for the government is investment that could lead to Australia losing control of supply chains and losing resilience. For example, a Chinese investment into the critical minerals industry may be of top concern.
Competition for Capital
The treasurer highlighted the competition for global capital was becoming more intense.To attract foreign investors to Australia, the government will put more resources into its compliance team to better monitor and enforce the conditions on transactions.
Meanwhile, investors with proven track records will be able to enjoy reduced paperwork, wait times, and compliance costs.
Starting from January next year, Treasury is also aiming to achieve a target of processing 50 percent of proposals within 30 days.
“Australia is an attractive destination for foreign investment, with investment flows into our country consistently outpacing the OECD average since 2006,” Mr. Chalmers said.
“Direct and portfolio foreign investment in our economy grew to be worth about $3.5 trillion in 2023.
“To make our economy even more prosperous and productive, to safeguard our national security and to make the most of the defining decade ahead, we need to get our investment settings right.”
Prior to the announcement, Liberal Senator Simon Birmingham signaled his support for making the foreign investment process as easy to access as possible, except in circumstances where it would be against national interest.“Devil will be in the detail,” he told Sky News Australia.
He raised concerns that certain industries, suggesting those involved in renewable energy such as critical minerals, would be given priority for investment funds as part of the Future Made in Australia Act.
“I’m concerned if the government is saying it’s going to give some type of easy process to its preferred industries, therefore suggesting that the less preferred industries have a harder time in the foreign investment landscape.”
Mr. Chalmers refuted the sentiment, saying the legislation was making Australia an “indispensable” part of the global transition to net zero energy.
“It is only partly about substantial public investment, it’s also about attracting private investment from around Australia, and indeed from around the world,” he said.
