Malcolm Turnbull backs Kidman move as foreign cash drops

Malcolm Turnbull has defended Scott Morrison’s controversial move to veto a Chinese purchase of a vast agricultural company.

Malcolm Turnbull in Sydney ‘The Australian government decides who invests in Australia.’ Picture: Ross Schultz

Australia is losing its share of global foreign investment as the resources boom fades, and the government has made it more difficult for foreigners to invest in the agriculture sector and real ­estate.

Foreign investment in Australia slumped to its lowest level in a decade last year, with a new OECD report showing Australia is at odds with the rest of the ­advanced world, where investment flows have surpassed pre-crisis levels for the first time to reach new records.

It comes as Malcolm Turnbull last night defended Scott Morrison’s controversial move to veto a Chinese purchase of a vast agricultural company, insisting that his government would decide who invested in Australia and who did not.

The Prime Minister declared that the “unprecedented” size of the S. Kidman & Co cattle empire — said to be about 1 per cent of the Australian land mass — justified the preliminary decision last Friday to reject the Chinese bid.

“The Australian government decides who invests in Australia. We are a sovereign nation and we are entitled to form a judgment as to whether an investment is against the national interest or not,” Mr Turnbull told Sky News.

“The scale of this investment, the amount of land involved, was enormous. It was of a scale that was literally unprecedented.

“And the Treasurer’s preliminary determination … is one that I think the vast majority of Australians would regard as entirely reasonable.”

Despite fears that the decision would deter offshore investors, Mr Turnbull argued that China would understand the outcome given that Australia had lower barriers to foreign investment than most countries. “There are few countries in the world where it is easier for foreigners to invest than in Australia. It’s a lot easier to invest in Australia than it is in China, for example,” he said.

The OECD report shows foreign businesses invested just $US22.6 billion ($29.7bn) in Australia last year, most of it in the first six months. It marked a 44 per cent fall from the $US39.6bn in 2014 and was less than half the $US55.9bn in the previous year.

Between 2011 and 2013, Australia was the fourth most important destination for foreign investment in the world, behind the US, China and Brazil.

But in the December half-year, its ranking slipped to 20th, with only $US5.2bn coming into the country, reflecting the completion of resource projects and the ­absence of other major new areas of expansion.

Australia accounted for 7.5 per cent of total foreign investment in the advanced world between 2011 and 2013, a share that has now dropped back to 1.1 per cent.

China has been the source of growth in global investment flows. Outbound investment from China to the rest of the world rose 52 per cent last year, reaching $US187.8bn. Offshore investment from the US contracted 5 per cent to $US320bn, while there were much sharper falls in investment abroad from Britain, France and Germany. The US would appear to be the major beneficiary of Chinese foreign direct investment, with total inflows there more than tripling last year to $384bn. Australia has been an attractive destination for Chinese investment, with Australian Bureau of Statistics figures showing the total invested here had reached $64.5bn by the end of 2014.

However, Chinese investment in Australia is meeting political ­opposition, evident in the ­Coalition government’s tightening of foreign investment legislation on agricultural land and residential property investment.

Veteran Liberal senator Bill Heffernan yesterday hailed the Treasurer’s decision to veto the purchases of the S. Kidman & Co cattle stations by a Chinese group, saying investors linked to foreign governments such as China were using the purchase of Australian land to set up their own global food chains rather than operating in an open market.

“Instead of bringing an army, as they would a hundred years ago, they just bring a chequebook,” he said.

The ebbing of foreign investor interest in Australia means the country is being forced to rely more heavily on foreign borrowing to cover its chronic current ­account deficit, which reached $75.1bn last year.

The current account deficit ­reflects both the gap between ­exports and imports and the flow of interest and dividend payments.

Australia’s trade deficit has grown in the face of falling resource prices, while interest payments are rising on the foreign debt, which climbed $100bn to reach a record $1 trillion last year.

While foreign investment in Australia is falling, so too is Australian investment abroad. The OECD records that Australian businesses repatriated a net $16.7bn last year. Several Australian businesses sold off troubled global operations, such as the National Australia Bank selling its UK-based banking business.