Address to TIAA-CREF Real Assets Conference
It's a great pleasure to be here today.
I'd like to thank TIAA-CREF Asset Management for an invitation that had been generously extended to my ministerial predecessor, Andrew Robb.
As the new Minister for Trade and Investment, I was only too happy to accept the offer to address an audience of investment executives, many of you from the nation's superannuation funds.
Australia has one of the world's largest pools of funds under management, estimated at about $US 2.1 trillion at end of 2015.
That's a substantial pool of long-term savings for a nation of 24 million people.
And it compares to the total stock of foreign investment in Australia – direct portfolio and other foreign direct investment – of $3.1 trillion at the end of 2015.
And yet, we often hear that the managers of that pool of Australian superannuation savings are much more reluctant than foreign investors to invest in the Australian agribusiness sector.
Today, I'd like to add something to that debate.
As well as touching on some of the huge opportunities that exist in Australian agriculture, I'd also like to talk about how such opportunities fit our broader economic narrative.
And, where the Australian Government sees the economy going after the end of the mining investment boom, and what steps we're taking to diversify the sources of economic growth.
The Australian economy is now in its 25th year of consecutive expansion and its proximity to the growth centres of Asia is attracting more and more interest from investors.
In recognition of this, firms like the Teachers Insurance and Annuity Association-College Retirement Equities Fund, or TIAA-CREF, are establishing offices in Australia.
They join substantial new investors in Australia such as some of Europe's largest contractors and developers like Ferrovial, or the rapidly growing presence of some of Canada's major pension funds.
And yes, we are also at the beginning of what I expect to be a long-term trend for a deepening investment relationship with China, building upon its role as our larges two-way trading partner.
Early this month new statistics showed that in 2015 the Australian economy grew by 3 per cent.
That's a faster rate than the US or the UK, or in fact all the economies in the G7.
Over the next few years, Australia's forecast economic growth rate will exceed that of any major developed economy, despite the downturn in commodity prices.
What this reflects in part is that after the mining investment boom there has been a diversification of Australia's economy away from a reliance on resources and energy.
Resource exports will still be a mainstay of our trade for many decades to come, but Australia is discovering fresh sources of growth in tourism and education, services, infrastructure and of course agriculture.
Attracting foreign direct investment to these sectors is a priority for the Australian Government and we're focused on making sure we remain an attractive destination for it.
That's why, since coming to Government, we've been focused on eliminating economically damaging taxes such as the carbon tax and the mining tax, and an aggressive program of red tape reduction – leading to a reduction of over $3bn in business compliance costs.
It's also why we placed a priority on completing an ambitious program of Free Trade Agreements and pursuing targeted trade missions, especially in Asia.
Next month, for example, I'll be leading what is likely to be the largest-ever trade delegation to leave our shores for Australia Week in China 2016.
The visit coincides with a program of events in cities across China promoting Australian trade, investment, education and tourism.
We're also creating a more entrepreneurial society through the A$1.1 billion National Innovation and Science Agenda, including tax incentives for investment in start-ups, enhanced accelerated depreciation provisions for intellectual property and corporate law reform to facilitate business restructurings.
These measures are all aimed at expanding the opportunity set for Australian business and unleashing the entrepreneurial spirit.
They also have a bearing on the types of investment opportunities that are emerging, especially the planned development of Northern Australia.
Since coming to Government, the Coalition has secured historic Free Trade Agreements with North Asia's biggest economies, South Korea, Japan and China, covering over 38 per cent of our two-way trade.
They are three of our largest trading partners and the concessions offered to agricultural goods in particular over the coming years are impressive:
- In China, for example, tariffs of up to 20 per cent on Australian dairy exports will be eliminated by 2026.
- On beef, tariffs of between 12 and 25 per cent will go by 2024.
- And wine tariffs of between 14 and 20 per cent will disappear by 2019.
But the benefits are not restricted to future years – they are already flowing to Australian agriculture.
In the first year of the agreement with Korea we saw:
- Exports of fresh Australian beef increase 37 per cent by value to $396 million
- Exports of frozen beef increase 30 per cent to $847.9 million
- Exports of fresh cherries increase 1105 per cent to $4.3 million
- Exports of bottled wine increase 54 per cent to $11.4 million
In the first year of our Japan agreement, we saw:
- Exports of fresh beef increase 22 per cent to $1.09 billion
- Exports of fresh table grapes increase 1025 per cent to $6.5 million
- Exports of shelled almonds increase 1413 per cent to $5.4 million
- Exports of bulk wine increase 140 per cent to $5.5 million
These are just a few examples of the impact so far on agricultural exports – a powerful signal to investors that this is a sector warranting further investment attention.
Australia now offers a level of preferential access to the key markets of North Asia unmatched by any other advanced economy, and that applies as much to foreign investors with a genuine presence here as it does to wholly Australian-owned firms.
The network of Australia's trade linkages does not stop with those FTAs either.
In addition to Australia's seven other existing FTAs, Australia is pursuing bilateral trade agreements with India as well as Indonesia, and the six nations of the Gulf Cooperation Council.
Through the Regional Comprehensive Economic Partnership (RCEP) we are negotiating an FTA with the ten ASEAN member states and those countries with existing ASEAN FTAs.
Looking ahead, we're also considering FTA negotiations with other major trading partners including the European Union.
And Australia, along with 11 other economies has reached an agreement on the Trans-Pacific Partnership, the TPP, which will link the economies of the US to Japan and Australia and Mexico to name just a few.
The TPP is the most significant trade and investment agreement in more than two decades. It represents almost 40 per cent of global GDP and will eliminate 98 per cent of tariffs between the member nations.
Collectively, Australia's growing network of trade agreements is forging our economic integration into the Asia Pacific, thereby providing companies in Australia with greater access to the world's most dynamic markets.
Foreign direct investment, as I mentioned is a priority for us.
It is an important source of new technology, capital and skills to improve productivity, provide jobs and generate income.
Inward FDI has always played a strong role in developing our agricultural sector – right back to the days when the UK's Vestey family ran cattle across a vast swathe of northern Australia.
Or, switching to the present day, the recent entry of Brazilian agribusiness giant JBS, investing over $2bn in meatworks and food processing facilities.
But foreign investment brings not just capital or new ways of doing things.
It also helps extend and cement supply lines for Australia's high quality, safe and traceable food exports to growing markets in Asia.
For instance, we welcome the recent investments by Indonesian firms in Australia's northern cattle industry.
Stronger two-way investment ties help foster greater understanding among all stakeholders of the value to both countries of a stable, predictable policy environment when it comes to the supply of cattle to Indonesian consumers.
The agribusiness sector is at the beginning of powerful, long-term, secular drivers of demand for high quality, clean and green food and fibre.
Over the period to 2030 – a little over 20 years, not 50 or 100 years – Asia's middle class has been projected to grow from just a little half a billion to over 3 billion people.
It's a once-in-a-millennium change, and with it, come spectacular opportunities for Australia.
To provide concrete examples of the sorts of ways investors can capitalise on this growth, Australia's states and territories have worked with Austrade to identify investment-ready projects across our five national investment priorities:
- food and agribusiness;
- resources and energy;
- tourism infrastructure;
- economic infrastructure; and
- advanced manufacturing, services and technology.
Examples of projects in development, seeking investment partners include:
- The proposed Northern Australia Beef Supply Chain Project centered around Julia Creek, Queensland.
This project is currently looking for investment of around $A90 million to create an integrated beef processing, logistics and trading business.
This would help reduce costs by creating a local processing facility in the heart of the region's beef production belt, allowing more direct transport to markets in China and elsewhere;
- Project Sea Dragon is a $1.45 billion greenfield project that will build a large-scale aquaculture operation producing around 120,000 tonnes of black tiger prawns in the Northern Territory and West Australia.
These sorts of opportunities promise to build upon what has already been strong investment flows from foreign investors into our agribusiness sector.
Earlier this year, for example, we saw Canada's largest pension fund, the Public Sector Pension Investment Board, invest in a third large cattle property in Queensland.
The fund now has an interest in around 300,000 hectares of Australian cattle country, with capacity for around 60,000 head of cattle.
In total, Australia attracted A$140.1 billion in gross FDI during 2014, an increase of nearly 18 per cent on the previous year.
I'd like to finish by focusing briefly on Northern Australia because it really does give you an idea of the scale of opportunity that exists in this country.
The Government is intent on developing Northern Australia and I've already mentioned a few investment projects there.
The region is located at the intersection of two great areas of economic and population growth, Asia and the tropics, and this presents major opportunities for investors to help us build upon existing capacity, capabilities and expertise.
The north contains 17 million hectares of arable land and 60 per cent of Australia's rainfall; however, significant infrastructure challenges must be overcome to unlock the region's potential.
This Government's White Paper on Northern Australia unveiled a range of measure to facilitate that, including the creation of a $5 billion Northern Australia Infrastructure Facility.
That facility has a targeted start date of July 1 this year and will provide concessional loans to build common-user infrastructure in energy, water, transport and communications.
Its aims to assist in building the foundation-stones of infrastructure that will then catalyse a broad range of private sector investment projects.
The demand for Australian agricultural product is real and growing. We've broken down the door with our trifecta of FTAs, with the promise of more to come.
Investing now to generate the Australian supply-side response is a big opportunity for investors globally.
It provides a pathway to a unique investment combination, to capitalise on the long-term, secular growth trend of Asia's burgeoning middle class, yet remain situated firmly within the safety and security of a successful advanced economy – the Australian economy.