Fifth Annual Investment Statement to Parliament

  • Speech, check against delivery

Mr Speaker, I have the honour to present the Coalition's fifth Investment Statement to the Parliament.

The Coalition Government appointed the first ever Minister for Investment in 2013. A mark of the fact we see trade and investment as two sides of the one coin. Both central to our vision for prosperity.

Over the last five years, the Government has strengthened Australia's sustainable long-term growth prospects.

We have prioritised attracting foreign investment, a key pillar of our economic and commercial diplomacy.

We have also opened investment opportunities for Australian businesses expanding and investing abroad.

We have ensured Australia remains an open and welcoming investment destination.

At the same time, we have introduced new regulation to protect our critical infrastructure, and ended Labor's benign neglect of enforcement of our rules governing foreign ownership of housing.

These have been five good years for Australian prosperity, as the global economy has consolidated its recovery from the global financial crisis of a decade ago.

Over the last five years, Australia has used foreign investment to build our economy, grow our businesses and bring significant benefits to Australians – contributing to economic growth, which in turn has helped support one million new jobs and record numbers of women in the workforce.

As Minister for Investment, I have been on the front line of championing investment into Australia – and it has been an overwhelmingly successful story.

Australia ranked fifth in the world for overall economic freedom in the Heritage Foundation's report on economic freedom for 2018. According to the report, 'Australia continues to be an attractive and dynamic destination for investment' thanks to our robust free-market democracy. Our Government facilitates vibrant entrepreneurial development. We have been recognised.

Australia's near-top of table global ranking is above that of all the world's major economies.

In the past five years, we have seen the benefits of the Government's successful investment policies flow through to Australians.

Our economy has continued to expand, with growth through the year to March 2018 up 3.1 percent.

These figures have exceeded expectations – the strongest growth for Australia in around two years, and the strongest growth to March 2018 as compared to any G7 country.

Both the Treasury and the Reserve Bank expect the growth rate to remain around three per cent over the next two years.

The Government has ensured the benefits from investment have been shared, creating jobs and providing our consumers and businesses with access to the best ideas and innovation the world has to offer.

Indeed, the latest ABS data shows real household incomes in Australia have risen by between roughly 50 and 60 per cent in every income bracket over the last couple of decades.

That's gains in the living standards of Australian households - at the bottom, middle and top of the distribution – real dividends delivered by our flexible economy and open trade and investment settings.

That is a phenomenal place to find ourselves.

Yet, let's be clear about one thing.

The success we have seen has not happened by chance – it has been a result of targeted, strategic, concerted efforts by this Government.

In particular, this Government has recognised the importance of attracting foreign direct investment – "FDI".

FDI underpins economic growth, creates jobs, it improves productivity, it enables the transfer of new technologies.

At the outset, this Government identified five priority sectors for attracting FDI – in the areas where we excel, leveraging our national strengths.

Number one: In agribusiness and food where Australia is helping meet the global demand for clean, green high-quality products; we are now looking at technology to drive productivity and enhance innovation.

Number two: As a world leader in resources and energy, including gas, LNG and coal, we are diversifying opportunities with renewables and the New Energy Economy minerals of lithium, cobalt, nickel and rare earths.

Number three: In major infrastructure our focus is shifting to greenfield investment, in both human-operated and intelligent transport systems.

Number four: In tourism infrastructure, a booming sector, we're encouraging growth in leisure attractions and regional destinations.

Number five: In advanced manufacturing, we continue to focus on medical technologies, defence and aerospace – ensuring Australia remains at the forefront of technological innovation.

Our focus on these priority investment sectors demonstrates the Government's commitment to diversifying the drivers of economic growth - to support our businesses today to deliver tomorrow's prosperity.

The transition from mining investment-led to broader-based growth is on track.

Business is in an upswing, and employment growth is strong.

Infrastructure investment is supporting the economy, and business conditions remain robust.

This is a solid narrative for the past twelve months, and it reflects a similar trend over the past five years.

The quantum of new foreign direct investment in 2017 was $105 billion, over the last five years this figure totalled $645.4 billion, reflecting the confidence investors continue to have in Australia.

In 2017, the stock of FDI from the US was worth $189.9 billion, an increase of 44.9 per cent over the last five years. From the EU, that figure was $188.7 billion, increasing by nearly 31 per cent over the last five years, of which the United Kingdom represented $83.2 billion.

In recent times, both Japan and China have proven to be growing sources of investment for Australia. Japan's stock of FDI last year was $92.5 billion, a 44 per cent increase since 2012. In 2017, China's stock of FDI was $40.7 billion, representing a strong increase of 146 per cent from a low base five years prior.

This is a total increase of 64.8 per cent in FDI stock from those two countries alone in the last five years.

The Government stated in our Foreign Policy White Paper, that openness is a means to an end, not an end in itself, nor an absolute.

This is an important point for this Parliament, and for my fellow Australians.

This Government is committed to advancing the national interest and bettering the lives of the Australian people.

We measure our success in terms of the benefits to Australians.

At each step, we have acted to ensure that our national interest is protected, as we continue to hold Australia up as a model of how economic openness can deliver prosperity.

These are challenging times. Just as with trade, protectionism against foreign investment is increasingly evident in some parts of the world, as countries turn inward to pursue self-reliance or assuage populist sentiment.

I can assure you the Government will not be going down that path; we will continue to welcome investors, their capital and the jobs they bring with them, to contribute to the Australian economy.

It means adhering to a set of principles, and it means committing to a level of predictability.

For foreign investors, these are important factors.

Time and again, investors emphasise their need for regulatory certainty; which enables them to make long-term productive investments in Australia.

This Government can give them those assurances, while still maintaining our commitment to the interests of Australia and Australians.

In recent years, State Government privatisations have seen increased foreign interest in our critical infrastructure assets, such as electricity infrastructure and ports – the total volume of critical infrastructure transactions is estimated to have exceeded $40 billion since 2015.

Modern technological advances mean that once physically separate infrastructure can now be accessed from afar. This yields significant productivity benefits, but our infrastructure could be targeted, controlled or manipulated.

Of course, these technology-driven challenges apply to wholly Australian owned and foreign-invested businesses alike. And Foreign Direct Investment brings not just capital, but access to new technologies and cutting edge management know how, ensuring the construction, operation and sustainability of our infrastructure assets is best in class.

Our road and electricity networks, our ports and airports are the better for it.

Nevertheless, it is clear that technology and other developments mean that, over the last five years, the foreign investment environment has changed – so to keep pace with these changes the Government established the Critical Infrastructure Centre in 2017, and the Parliament passed the Security of Critical Infrastructure Act in 2018. This provides more certainty for investors, and more protection for our national infrastructure.

We've also renovated our investment policy architecture, which has seen important changes to Australia's Foreign Acquisitions and Takeovers Act 1975 – including the first major rewrite of the Act since its inception 40 years ago - providing more certainty to investors while ensuring the protection of our national interest.

We understand investment is critical to our national interest in terms of both prosperity and security.

Our policies support our open economy, creating the right environment for companies to make their own decisions, and to enhance their relationships with partners across the globe.

We commissioned research to better understand the important role foreign investment plays in Australia's growth story.

Foreign-owned firms make up only 0.5 per cent of our total operating businesses, but they make up 20 per cent of our large businesses.

FDI is also an important driver of productivity and exports. Nearly 30 per cent of our exports come from majority-owned overseas firms.

Excluding the finance and insurance services sector, 21 per cent, or around $222 billion of Australia Industry Value Add, came from majority foreign-owned firms. Investment from overseas means jobs for Australians.

For instance, over 270,000 Australian jobs are thanks to American majority-owned firms. A further 140,000 Australian jobs are with UK majority-owned firms, and well over 70,000 Australian jobs come from Japanese majority-owned firms.

The benefits of foreign investment from majority-owned foreign firms are shared across our industries. Foreign investment supports about one in four jobs in mining, one in five in information media and telecommunications, every sixth job in manufacturing, and every eighth job in professional, scientific and technical services. It's supporting our leading industries today and the development of our future industries.

This is FDI in action.

FDI is key to modernisation of our businesses and our economy – supporting improved competitiveness, innovation and productivity through the introduction of new technologies.

We know FDI brings jobs, but it also brings higher paying jobs for Australians.

Chinese company, Tianqi Lithium is spending more than $700 million constructing a lithium processing plant in Kwinana, Western Australia. The project will create an estimated 500 local construction jobs and over 200 local full-time jobs when complete in 2019. The plant will process up to 48,000 tonnes per annum of lithium hydroxide for the manufacture of lithium batteries.

Australian firms are working with investors to stay on the leading edge of agricultural technology. Where we need to be.

For example, German tech giant Bosch is working to develop new approaches to environmental sensing for use in agriculture. The first of these smart sensors are already under development at Bosch's Melbourne-based engineering centre.

Just as Germany is at the forefront of Industry 4.0, the application of advanced thinking and technology to manufacturing processes, Australia's world class innovation in agribusiness and food is helping drive Agriculture 4.0, using smart devices to drive production efficiencies.

So it makes sense for Australian firms to collaborate with German counterparts, and those partnerships will deliver significant benefits to the Australian economy.

The technologies of Agriculture 4.0 will allow the sector to be more profitable, efficient, safe and environmentally friendly. This is what consumers and producers both want.

British private defence firm BAE Systems has recently been contracted to supply the Australian Navy with their Future Frigates – we will secure our future defence capabilities by accessing the most advanced technology in the world. A $35 billion investment, which is expected to generate over 4,000 highly-skilled jobs around the country.

The value brought in by FDI explains why the Government has included comprehensive investment chapters in our FTAs, helping to facilitate productive FDI into Australia, providing access to global supply chains and enabling connections to overseas markets.

I have recently launched negotiations for a free trade agreement with the EU. In 2017, as a group, the EU was Australia's largest source of foreign investment and Australia's second largest foreign investment destination. An FTA will add to the attractiveness of Australia as an investment destination, supporting economic growth and job creation.

Why does it matter? Because foreign-owned businesses in Australia – who themselves support one in ten jobs here – make a significant contribution to the one in five jobs in the Australian economy involved in trade-related activities.

This has arguably been the most productive period in trade policy in Australia's economic history.

Since the Coalition was elected, the coverage of our free trade agreements has increased from around a quarter to two thirds of our global trade.

By the time current negotiations are concluded, we will have locked in binding rules-based commitments with countries accounting for 88 per cent of our two-way trade – that's $672 billion in 2017 trade value terms.

Binding FTAs are one of the most effective countermeasures an open trading economy like Australia can adopt against protectionism.

Trade agreements lock in market access for Australian business, and lay down predictable, business-friendly rules of the road for trade and investment in goods and services alike, including in economies with very different political and legal systems to Australia.

Throughout these negotiations for new partnerships, or through periodic reviews of our existing FTAs, we facilitated investment at home and created new opportunities for Australian investment abroad.

Of course, attracting new and retaining existing investment is a critical component of each and every one of these free trade agreements – but it doesn't stop there.

We need to make sure that we are maintaining a solid environment for what I call "repeat investors."

It is a question of promoting international investment once it is here – by retaining it and by growing it.

For example, Fujitsu.

This Japanese powerhouse set up in Australia in 1973 and immediately recognised the need for local management, skills and staff – an approach that has paid off both for the company and for Australia.

By the end of the 1980s, Fujitsu Australia employed 900 people and in 1989 invested in a software development technology centre in Sydney that set new standards. It was the first such centre Fujitsu had built outside Japan and has become a technology leader in Australia.

Fujitsu Australia now employs over 3,500 staff across Australia; is one of Australia's leaders in software research and development; and one of our biggest information and communication technology firms providing the skills and jobs of the future.

Our cohesive Government strategy supports a greater understanding of investment opportunities in Australia, and keeps businesses like Fujitsu Australia investing here.

For the latest trends in Australia's international investment position with the world I'm releasing today the International Investment Australia 2017 Report.

Our country is a strong, stable, well-governed place to invest, with growth potential and unparalleled access to growing markets in the region.

We should not forget the value of creating new opportunities for our businesses to invest overseas, this is a crucial part of maintaining our global competitiveness and integrating into value chains.

We are working on outward investment opportunities – connecting Australian companies to international markets, so they can take advantage of the benefits of internationalisation.

One third of Australia's top 2000 companies hold direct investments abroad – and, as a result, they are more competitive. They are able to tap new innovations, find new technologies, and access new information.

They are able to sell more goods into markets, generate greater value for their shareholders, and contribute more through taxation to Australia's economy.

Almost three quarters of Australian goods and services sold to US, EU, Canadian and New Zealand customers in 2014 was from Australian companies based in those locations.

We are doing all we can to ensure barriers are reduced, and that Australian investors are confident in their ability to operate overseas.

This is why it is so important Australia is part of the first group of countries to ratify the TPP-11, the world's most significant trade and investment agreement in more than two decades. The deal will create new investment opportunities and provide a more predictable and transparent regulatory environment for investment, in one of the fastest growing regions in the world.

In many of the places where we see active Australian investment, we also see the emergence of friendships – whether in government or in business.

This is particularly true of our own region, the Indo-Pacific.

Naturally we will experience deeper economic partnership and closer confidence in two-way investment.

This is how we mark our successes.

Last month, the Government welcomed the release of An India Economic Strategy by former Secretary of the Department of Foreign Affairs and Trade, Peter Varghese.

The Government commissioned this report to bring about a step-change in an economic relationship that will be pivotal for Australia in the decades ahead.

Today, Indian investment in Australia is relatively modest, but as India continues to grow and expand its economy at a rapid rate, the potential for significant growth in direct investment from India, across a broad range of sectors, is real.

For example, Tata Consulting Services (TCS) is one of India's largest companies and their Australia operations currently employ around 3,500 associates. TCS Australia is also acting as a bridgehead for Australian research and technology to reach customers across the globe.

These partnerships work both ways – the India Economic Strategy aims to make India the third largest destination in Asia for outward Australian investment. This is in line with the economic opportunities India provides, as the world's second largest population, and currently third largest economy (in purchasing power parity terms).

By building these bridges, this Government is securing our future prosperity, we are defending an open global economy, and we are resisting protectionism in Australia.

Company tax rates continue to fall around the world, with the US recently lowering its federal rate to 21 per cent. The rest of the world is not standing still. Improving the international competitiveness of Australia's business environment - particularly our business tax rates - remains an ongoing challenge. Lower company tax rates will result in more investment from overseas, more upgrades to our equipment and technology – making us more productive and increasing jobs and wages.

A review of the investment chapter of our China FTA, ChAFTA, was launched last October. The review will be followed by negotiations to expand the agreement's investment provisions, creating the conditions for further investment between our two countries.

Another important initiative for the future is our Government's commitment to a new Nation Brand Initiative, which brings Australia's strengths and values under one banner.

It will be a unifying platform to promote our strength, stability and attractiveness as an investment destination in international markets. A brand that will champion Australia's investment potential in more areas than what we are currently known for, in particular our innovation, research and development facilities, and, naturally, our premium goods and services worldwide.

We find ourselves in a great position, but must stay competitive in an evolving global investment environment, especially given increasing protectionism in some quarters.

Australia needs to make the right moves today to ensure that we remain competitive tomorrow.

Today our leading industries include tourism, agriculture, and education.

Industries of the future such as data collection, storage and analytics, virtual commerce, advanced manufacturing and the New Energy Economy – all depend on an open economy and the benefits of FDI.

The last five years have been good years for Australia.

In our 27th consecutive year of economic growth, record numbers of jobs have underscored the resilience of our economy.

It's the Government's Economic Plan in action, of which a renewed focus and appreciation of the value of foreign investment is a part. It's why we created the role of Investment Minister.

It has been five years of intense work, and five years of tangible results – through free trade negotiations, international and domestic advocacy, engagement with foreign investors and renovation of our investment policy architecture.

Much has been achieved. Much remains to be done. At this time of global challenge to free trade and open investment, I'm very proud Australia is leading the charge for openness. Australians can be confident we have the right policy settings on foreign investment to ensure we make the most of our future opportunities.

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