The Assistant Treasurer and Minister for Competition Policy and Consumer Affairs, Chris Bowen MP, today announced that the Rudd Government will change the foreign investment policy to extend the timeframe for the development of vacant commercial land from 12 months to 5 years.
“This change to the foreign investment policy is aimed at increasing competition in the economy,” Mr Bowen said.
“The current time limit on foreign investors discourages new competitors from entering the market and prevents some existing competitors from expanding their business because they cannot secure forward purchases of land in growth areas and ‘Greenfields’ sites.
“The change recognises the reality facing commercial land purchasers that 12 months is simply not enough time for completing all the statutory and commercial processes required to enable development to commence.
“The Rudd Government believes that a 5 year limit strikes the right balance between encouraging competition while preventing foreign investors from land banking and speculating.
“This reform creates a more level playing field, and pulls down the barriers to entry to foster competition.
“The grocery industry is a classic example, where in Australia we have a highly concentrated sector, especially by international standards.
“When it comes to the rising grocery prices, we have seen the cost of fruit and vegetables alone rising by 20 per cent in the last three years.
“Australian families want the government to push and promote competitive pressures in the grocery industry and across the economy.”
This reform builds on the current inquiry being conducted by the ACCC inquiry into the grocery sector supply chain – from the farm gate to the supermarket counter.
“The Government believes that foreign investment is in our national interest. It creates growth, jobs, and keeps prices lower for Australian consumers.”
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Background
At present foreign investors can purchase vacant commercial and residential land. However, under existing policy it is a condition of approval that foreign investors commence continuous substantial construction on any vacant land acquisitions they make within 12 months of receiving purchase approval.
The intent of this requirement has been to discourage the potential for foreign investors to engage in speculative ‘land banking’ in the Australian property market.
In addition, there is a further restriction requiring foreign investors to spend a minimum amount of 50 per cent of the acquisition cost or value of the vacant land purchase (whichever is higher) on development. This restriction will be retained with the government’s changes.
The change recognises the reality facing commercial land purchasers that 12 months is insufficient for completing all the processes required to enable development to commence and that large companies commonly seek to take forward investment decisions beyond a 12 month horizon, particularly in the case of establishing new supermarkets in ‘Greenfields’ sites.