SARAH FERGUSON:
Treasurer Jim Chalmers is giving a speech tomorrow reframing Australia's economic policy as a national security issue with new rules about foreign investment at the centre. I spoke to him earlier. Treasurer, welcome to 7.30.
JIM CHALMERS:
Thanks very much, Sarah.
FERGUSON:
You're delivering a major economic speech tomorrow at a foreign policy think tank, much in the way that the US National Security Adviser Jake Sullivan did last year. Are you proposing a significant rewrite of foreign investment rules based on national security?
CHALMERS:
In short, Sarah, I am. And one of the reasons why I'm delivering this speech at the Lowy Institute tomorrow is because this third Budget that we'll hand down 2 weeks from now will have the usual emphasis on responsibility, on fighting inflation in the here and now. But there'll be a much bigger emphasis on economic security and that's because we recognise the world is changing. The pace of that change is accelerating. We need to make sure that we are attracting investment, private investment and public investment, as part of a Future Made in Australia and foreign investment has got a role to play there, so long as it's in the national interest.
FERGUSON:
So, my question was a significant rewrite of foreign investment rules to which you answered yes. Does that mean that you've identified specific existing projects which don't line up with our national security interest?
CHALMERS:
No, the focus is more forward‑looking than that, Sarah. And what I'm intending to announce tomorrow is a major overhaul of our foreign investment framework in 3 ways. I want to make it stronger so that it's more robust, that we are imposing much more scrutiny on investments which may not be in our national interest. Secondly, I want to make it more streamlined for the less risky investment that we trust. And thirdly, I want to make it clearer and more transparent.
FERGUSON:
Well, give me some examples, because you already have existing powers that you used last year against a Chinese businessman. How much further will this policy go?
CHALMERS:
What this new policy will do is when we get an investment bid, we will categorise it, determined by the amount of risk we think it poses. If it's low risk, it will get the streamlined treatment much faster than before. If it's higher risk, it will get more scrutiny, a stronger, more robust examination to how it relates to our national interest. And some of the things that we're worried about will be familiar to you, Sarah, where we are worried about losing control of supply chains, where we're worried about losing resilience, where there is the capacity for interference and a whole bunch of other tests that we apply to foreign investment. What's happening right now is we're treating most investments more or less the same, and that's gumming up the system. We're spending a lot of time examining proposals which are low risk, and that comes at a cost. And so what I want to do is I want to substantially strengthen the foreign investment framework in this country. Foreign investment can be a force for good if it's in our national interest and I want us to be much better at screening out the less risky investment so that we can devote our time and energy to the more risky investment.
FERGUSON:
Let's talk about the risky investments. You just used the word interference. Risk of interference. What do you mean by that?
CHALMERS:
Well, obviously, if a supply chain or an industry is controlled more by overseas interests, it has the capacity to be manipulated, to be interfered with. In some cases, the most extreme cases, to attract sabotage or espionage or some of those sorts of things. And so we need to be very careful about that, particularly in our critical industries, whether it's critical minerals, critical data, critical infrastructure, these are the sorts of things that we are especially attentive to. And so where there's investment in sensitive areas or in sensitive places or sensitive industries, people can expect that to attract much more scrutiny.
FERGUSON:
Now, of course, we're talking about foreign investment, but largely, of course, we're looking at the threat coming from China when it relates to Australia, and obviously, particularly in relation to critical minerals and the energy transition. But here's the question: the Canadian government, when they reviewed this set of laws in Canada, ordered the disinvestment of 3 Chinese companies. Is that what you're proposing here, similar prohibitions on state‑owned Chinese enterprises?
CHALMERS:
First of all, the regime in Australia is already a bit tougher for state‑owned enterprises, and I think that's appropriate. I don't intend to change that when it comes to the zero threshold and the like. That's an important part of the current framework that we are looking to enhance and improve. I'm pretty confident when people see the full suite of this overhaul tomorrow, they'll see that we have been very, very attentive to making sure our framework is as robust as it can be, not because we are focusing on one country necessarily or another. The tests that we apply to investments apply equally to investments from all parts of the world. But we will make it more robust, we will make it stronger, and we will make it easier or better informed to apply some of those retrospective tests if we need to.
FERGUSON:
Now you're talking about boosting the ability of Treasury officials to make on‑site visits to critical projects. How would on‑site visits by officials uncover security issues?
CHALMERS:
Well, it's just one of a suite of tools that we want to make more substantial when it comes to the scrutiny on foreign investment. So, on‑site visits are part of it but also the broader compliance story. Sometimes when foreign investment bids are approved, in fairness, by governments of either political persuasion, there are a series of conditions imposed on that. We want to make sure we've got the resources to actually enforce those conditions, and some of those will be physical, will require an on‑site visit. Some of them will be financial or the structure of ownership, or the structure of boards and the like. And so a big part of what I'm announcing tomorrow is about how do we make sure when we do impose these conditions, they're actually complied with.
FERGUSON:
And would you be sending security officials from ASIO, for example, to accompany those Treasury officials? Because an on‑site visit at a company that is digging rare earths out of the ground, it's very hard to imagine a Treasury official can make an on‑site visit and discover anything crucial.
CHALMERS:
I'm a bit reluctant to get into those kinds of operational issues. You know, primarily this is the focus of the Foreign Investment Review Board, a great group of people very well supported by the Treasury. And it won't surprise your viewers to know that they consult very closely with our various agencies across the government. And what this is about more broadly, this foreign investment reform that I'm announcing tomorrow, is making sure that that coordination is as good as it can be, as efficient as it can be, as robust as it can be. The actual operationalisation of that is a matter for the relevant officials.
FERGUSON:
Now, in the case of these new rules, and I haven't asked you yet whether you'll need to legislate as well. I'll come to that in just a moment. But are you talking about future projects or also existing projects?
CHALMERS:
Well, first of all, I can answer the question about legislating. We don't need to legislate the changes I'm announcing tomorrow. That's easily enough dealt with. On the prospective versus retrospective, my predecessor, to his credit, gave treasurers more power to look at deals which had already been struck and to go back into those if that's necessary. I supported that at the time, and I support that now. But what we're most fundamentally talking about now is getting the regime right for the future. We can enforce compliance, we can go back into those deals. We are enhancing, actually, these changes. I'm announcing tomorrow some of those powers, but fundamentally, it's about looking forward. It's about how do we attract more less risky investment and how do we better screen the more risky investment. Because if you think about a Future Made in Australia, you think about our capacity to be a renewable energy superpower, you think about the future of our economy, it's going to rely on hundreds of billions of dollars of private investment, and so we need to make sure that that's in the national interest. Foreign investment can be a big part of our national economic success, but only if it's screened robustly and that's what I intend to do.
FERGUSON:
Just on the question of call‑in powers, because I think you retain a 10‑year call‑in power over these new projects. Are you talking about extending that call‑in power or beefing it up?
CHALMERS:
I'm talking about making that power more robustly applied and enforced. One of the things that has concerned me, and clearly it concerned my predecessor, because he took some steps here, is we're worried about once we sign off on a foreign investment proposal, we’re worried about policing the conditions, and we're worried about when that investment changes. No investment stays exactly the same over a long period of time. And so any normal, self‑respecting country like Australia should have the ability to go back into those deals, if that's necessary. And what the changes I'll announce tomorrow will be about is beefing that up, as you say, but also having a much more robust information base to make those kinds of often difficult decisions.
FERGUSON:
We're talking principally about China here. I just want to raise something that Don Farrell said, the Trade Minister in November, he said there were no proposed changes to Chinese investment in Australian critical minerals and, quote, that's not going to change. Is Don Farrell on board with these changes?
CHALMERS:
Of course. We've done this in a really methodical way, a really consultative way. And the point that Don's making, I think, is the point that I made a moment ago, which is our foreign investment regime is non‑discriminatory. The tests apply equally to investment, no matter where it comes from around the world.
FERGUSON:
So, he was speaking there on the sidelines of the APEC Summit. So, these were not comments made off the cuff. He said, we need the investment, including from China. Will you now be treating all investment from China differently?
CHALMERS:
No, the tests that we apply are who's making the investment. So, state‑owned enterprises obviously attract a different level of scrutiny, how they're making that investment, the structure of the deal and in what industries they're investing in. And those tests apply across the board, whether it's China or Singapore or Canada or other places where we get a lot of interest, a lot of foreign investment. So, the point that Don's making is the point that I would make. Our foreign investment regime is non‑discriminatory. We welcome investment if it's in our national interest, but we need to make sure that we're screening that robustly, and that's why I'm strengthening the regime.
FERGUSON:
I just want to ask you about taxes. You're also talking tomorrow, I understand, about ensuring investors pay their fair share of taxes. What specific projects are not delivering the returns they should?
CHALMERS:
One of the things you notice, Sarah, I get hundreds of foreign investment bids come over my desk, as do my colleagues Stephen Jones and Andrew Leigh. And one of the big things that we pay a lot of attention to is the structure of the tax arrangements for these bids. And what's become clear to us over the last couple of years is that we need to make it much clearer to investors, potential investors, what we expect from them when it comes to their tax obligations here in Australia. And so what I'll be releasing and working up initially tomorrow, but over the course of the next couple of months is much clearer and more transparent tax guidance. So, there's a bit less of the back and forth between decision makers and the Foreign Investment Review Board and the bidders trying to understand what their tax obligations are. If we can clear that up, we can tidy that up, then I think that's a really important thing.
FERGUSON:
Jim Chalmers, thank you for coming to talk to us, and particularly on this fascinating subject. Thank you very much indeed.
CHALMERS:
Thanks for having me back, Sarah.