Scott Morrison reassures on foreign investment

Scott Morrison has moved to assure potential foreign investors that Australia is open and attractive.

The Treasurer backed the Australian financial system’s health, compared to its global counterparts.

Treasurer Scott Morrison has moved to assure an audience of potential foreign investors in New York that Australia is open to foreign investment and an attractive destination to invest, following two high-profile rejections of Chinese foreign investors this year.

“Australia’s economic success has been built on capital from overseas: From Great Britain and China and Japan, and of course our single largest investor, the United States,” he told a lunch hosted by the American Australian Association. “It was imported capital that has created wealth and jobs in Australia.”

Australia needs to fund a current account deficit of around 4 per cent of GDP on average every year, he said, citing Treasury modelling showing that a failure to fund this would cut economic growth over the next decade by 2.6 per cent, as well as cutting gross national income and reducing real wages.

“We’ve had our current account deficit for as long as records have been held in Australia,” Mr Morrison said.

“It is unquestionably in our national interest to welcome foreign investment to Australia. Of course that welcome must come with a clear set of practical rules to ensure that foreign investment is not detrimental to our national interest.

“I believe our investment screening arrangements play an important role in ensuring that our door always remains open. It helps reassure the Australian community that the investment will always occur on our terms and in our interests. And that in turn reassures investors that their investments are valued by Australia as valuable and desirable.”

The Treasurer’s comments follow his August decision to block Chinese bidders from buying NSW electricity network Ausgrid due to national security concerns, as well as his objection to Shanghai Penxin’s purchase of Australia’s largest land holding, S Kidman & Co.

“We welcome an overwhelming majority of investment proposals from proponents from all around the world,” he said. “Rejections when it comes to foreign investment in Australia are rare.”

He also said the particular arrangements for American investors are “some of the best we have”, given the free trade agreement that allows a screening threshold above $1 billion, compared to $252 million for countries that do not have free trade agreements in place.

Mr Morrison also launched a defence of the health of Australia’s economy, saying debt is low when compared to other countries with a AAA credit rating.

The AAA rating was recently placed on negative watch by ratings agency Standard & Poor’s, given concerns over ongoing budget deficits and the potential for further falls in commodity prices. The Treasurer took the opportunity to meet with S&P while in New York.

He emphasised the government’s focus on reducing debt through planned Budget savings measures, expressing hope they would soon be passed and calling the new parliament “workable, so far”.

His remarks contrast with a warning he gave shortly before the parliament returned that if the parliament blocked all savings measures, gross debt could pass $1 trillion in a decade.

In response to an audience question about the biggest risks to Australia, he mentioned managing the transition away from the mining investment boom, as well as the debt levels at China’s state-owned enterprises and local governments.

“We don’t look at China with rose-coloured glasses,” he said. “We seek to understand it [the debt] and then respond in kind.”

He again warned against a rising global tide of protectionism, which has seen both major US presidential candidates criticise the Trans-Pacific Partnership trade deal, as well as Britain’s vote to leave the European Union. Closer to home, a poll last month found 49 per cent of respondents supported a ban on Muslim immigration.

It would be “unthinkable” that a generation that has prospered from foreign investment, trade and immigration would try to deny that prosperity to future generations, he said.

“We are an open trading economy and we need to continue to do that to be successful,” he said. “We need to ensure private capital can go and find its home in our economy.”

He compared the opportunity to invest in Australia with the negative interest rates on offer for government debt in some European countries.

“The fact that you can take your $10 million and you can give it to the German government for 10 years and pay them for the privilege and then get back what you put in, that doesn’t say to me that the capital is finding great places to go and live for 10 years,” he said.

“That is a challenge to advanced economies to provide the economies where that invested private capital can go and invest and be confident.”

As the parliamentary inquiry into the banks continues, the Treasurer backed the Australian financial system’s health, compared to its global counterparts.

“The major Australian banks for instance have remained profitable. That’s far better than the alternative. And significantly more so than most of their international peers in the United States, Japan and Europe,” he said.

“We want a banking system that is strong because it is a strong banking system that improves our resilience to external shocks.”

Mr Morrison will next travel to Washington DC to attend the International Monetary Fund and World Bank annual meetings.