A global economy entering a “new phase”, geopolitical threats and the energy transition mean Australia’s foreign investment settings need to move with the times, Treasurer Jim Chalmers says.
He will outline changes on Wednesday to add resources to screen foreign investment proposals that may pose a national security risk, while allowing low-risk foreign investments to be fast-tracked.
Rising geopolitical tensions, the race to net zero, fragmenting markets, shifting demographics and supply chain shocks are the new normal, Dr Chalmers will say during an address to the Lowy Institute.
“We are now in a new phase in the global economy, one just only becoming evident,” Dr Chalmers will say, two weeks before he delivers his third budget.
Stronger, streamlined and more transparent foreign investment rules are needed in response, starting with more resources for screening riskier ventures, such as critical minerals investments or those near defence force sites.
Fast-tracking will be opened up to investors already known to the country and those that “don’t raise any sensitivities”.
In Australia, foreign investment proposals are screened case by case to ensure they align with the national interest.
Adjustments to foreign investment settings as well as the government’s Future Made in Australia industrial policy reforms will make Australia a “more attractive place to invest”, the treasurer will say.
“While we have a strong track record in attracting investment into Australia, we cannot be complacent,” he will say.
Dr Chalmers will use the opportunity to reveal two separate streams of industry incentives and support under the Made in Australia Act — one for the net zero transformation and a second for the “national interest”.
The latter will kick in “where domestic sovereign capability is necessary to protect our national security interests” or to “ensure our economy is sufficiently resilient to shocks”.
Deloitte Access Economics partner Stephen Smith said it was important industrial policy was designed well or it risked putting the nation in a worse budgetary position.
His comments, outlined in a pre-budget report, echoed concerns raised by other economists that policies such as government support for Australian-made solar panels could distort markets.
“There will only be a market for Australian-made panels if the price of Chinese-made panels is artificially raised by tariffs, quotas or other distortions in the market,” Smith said.
He urged policymakers to make a stronger case for such policies that acknowledged, by way of example, any potential supply chain risks of relying on China for solar panels.
“A proper debate on the Future Made in Australia policy must focus on the costs and benefits of both doing nothing– if the world has changed – alongside the costs and benefits to taxpayers and consumers from intervention,” he said.
The government’s Defence Strategic Review 2023 says “China’s assertion of sovereignty over the South China Sea threatens the global rules-based order … in a way that adversely impacts Australia’s national interests”.
Deloitte Access is forecasting a second surplus in 2023/24 of $13.4 billion — smaller than the $22.1 billion inked in 2022/23 but an upgrade on the $1.1 billion deficit forecast by Treasury in the mid-year budget update.
This article was first published by AAP.
