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Friday 18 Aug 2017 | 11:28 | SYDNEY
Friday 18 Aug 2017 | 11:28 | SYDNEY

Five points on foreign investment (part 1)

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COMMENTS

11 May 2009 12:36

Last week, I was a panel member in a discussion organised by CEDA on the issues raised by foreign investment in the Australian mining sector. I made five points, which I'll summarise in blog posts over the next two days. Here's my first point:

1. The overall policy debate about foreign investment is a done deal. As an economy that invests more than it saves and so runs current account deficits that require offsetting capital account inflows, the reality is that Australia is dependent on foreign investment.  This has been the case for a long time:

Australia’s foreign investment policy regime reflects this basic reality. According to the opening two lines of the government’s investment policy:

The Government’s approach to foreign investment policy is to encourage foreign investment consistent with community interests. In recognition of the contribution that foreign investment has made and continues to make to the development of Australia, the general stance of policy is to welcome foreign investment.

A caveat here is the phrase ‘consistent with community interests’. An elected government has to take into account the views of its voters, and as our Lowy Institute polling shows, there is a degree of public caution: 90% of those polled said they either strongly agreed or agreed that ‘the government has a responsibility to ensure major Australian companies are kept in majority Australian control’ (Figure 5 on page 6). 

This means the foreign investment regime not only has to ensure that Australia can continue to tap the economic benefits of foreign investment, but also reassure somewhat sceptical voters that this process is beneficial to Australia. 

Anyway, it is clear that nearly all of the current policy debate is not about the general merits of foreign investment, but rather about the merits of foreign investment from one particular source — China. And that's the subject of my next post.

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