Annual Investment Statement to the Parliament
Mr Speaker, I have the honour to present the Coalition's fourth Investment Statement to the Parliament, reflecting the critical importance of productive foreign investment to the growth and job creation agenda of the Government.
The recently released Foreign Policy White Paper described a more interdependent world in which Australia is actively pursuing its economic interests.
In this world, remaining open and outward-looking are vital for Australia's strength and future prosperity.
The international investment landscape is increasingly competitive, and it is important we maintain Australia's advantage through a dynamic and responsive trade and investment agenda.
Openness connects our economy to larger, often faster growing markets. It enables Australia to benefit from the world's best goods, services, people, capital and ideas to grow our economy and create more jobs.
Foreign investment is critical to this story. Without it, production, employment and incomes would all be lower.
Our modern, comprehensive Free Trade Agreements (FTAs) provide a competitive edge to Australian exporters and lower prices for Australian consumers.
They also promote and facilitate two-way flows of investment by providing certainty about foreign investment policy settings in Australia and FTA partner countries.
Foreign investment is an essential part of Australia's economy, sustaining our regional communities, and helping our small and medium sized businesses access the capital and opportunities they need to grow.
Australia's economy is in a strong position, growing significantly faster than many of our global peers over the last five years - averaging 2.8 per cent real GDP growth, compared with the advanced economy average over the same period of 1.7 per cent.
The Treasury forecasts suggest even better days ahead, with real GDP growth expected to rise to 3 per cent in 2018-19.
Our open, well-regulated and stable economy, underpinned by strong institutions and a talented, highly skilled workforce, ensures Australia remains in an excellent position to continue to attract investment.
Australia's unique advantages, and this Government's economic and policy credentials have seen total foreign investment stocks in Australia rise by $153 billion or 5 per cent to $3.2 trillion at the end of 2016.
In 2016, the quantum of new foreign direct investment (or FDI) into Australia was $112.4 billion, showing Australia remains an attractive and trusted investment destination.
This data is included in the International Investment Australia 2016 publication, which I am launching today.
Well-regulated, productive foreign investment supplements domestic savings to increase and improve the economic opportunities available to Australians right across the country, from Cairns to Perth, Broome to Hobart.
The Government is determined to secure the benefits of foreign investment for Australia, and ensure those benefits are shared across the community.
This is part of the Government's unwavering focus on the creation of more and better paying jobs, which has seen more than 350,000 Australians find work in the 12 months to October 2017.
An open investment policy, however, is a means to an end, not an end in itself. The Government's trade and investment agenda is delivering economic prosperity while ensuring we maintain the strengths of our traditional Australian society and institutions.
Over the last year, I have continued speaking with Australians across the country to ensure policy continues to reflect community expectations.
We have listened, and this Government has continued to develop its investment framework, which I will address in a moment.
Mr Speaker, my report today comes in three parts.
First, an update on some great examples of the productive foreign investment that is benefitting Australians.
Second, I will outline how we are improving our competitiveness, to remain an attractive destination in an increasingly competitive international investment environment.
And third, I will report on the Government's engagement with the Australian community about foreign investment.
Australia has long been a beneficiary of productive foreign investment, helping us to prosper as a nation and grow our important industries – like manufacturing and mining, which together have received more than 50 per cent of Australia's FDI stock; and our services sector – which employs four out of five Australian workers.
The United States remains Australia's largest direct investor by a significant margin, representing more than 24 per cent of our total FDI stock.
US-affiliated firms in Australia employ more than 335,000 locals - around one in 35 Australian jobs.
US firms like Bechtel, one of the world's largest engineering, construction and project management companies; Costco; ExxonMobil; and Boeing, which has invested over $1 billion in Australia.
Their investments represent a very significant contribution to our economy and society.
For decades, direct investment has been a central pillar of Australia's relations with Japan. Indeed this year we celebrate the 60th Anniversary of the Australia-Japan Agreement on Commerce.
Japanese companies helped to fund our growth as a minerals and energy superpower, developing some of our largest export industries – with long-term export contracts and associated investment opening up the riches of the Pilbara's iron ore, the Bowen Basin's coal and the North West Shelf's LNG.
These investments have driven regional development, creating tens of thousands of local jobs and bringing in export and tax revenue over many decades, which helped fund public services - like schools, hospitals, roads and ports – through which Australians continue to benefit today.
In July this year, I launched the report 'Japanese Investment in Australia – a trusted partnership'.
The report demonstrates interest from Japanese companies in investing in Australia is growing - and diversifying into areas such as digital technologies, infrastructure and financial services.
In the six years to 2016, Japanese FDI stock increased by 78 per cent to $90.9 billion, making Japan Australia's second largest source of foreign direct investment behind the United States.
After the United States and Japan, our third largest source of FDI is the United Kingdom, whose investment increased in 2016 by 4.9 per cent to reach $67.9 billion, while investment from the Netherlands, our fourth largest source of FDI stock increased 5.3 per cent to $50.4 billion.
Indeed, direct investment stock from the European Union collectively represents $164.8 billion, or around 21 per cent of our FDI stock. European interest in Australia remains strong; investment from Germany, our tenth largest source of FDI, increased 15 per cent in 2016, and as a whole, EU FDI increased 7.1 per cent.
Like US, Japanese and European investment before it, Chinese investment is also delivering jobs and tax revenues, and giving Australian businesses connections to overseas markets.
Direct investment stock from China, while not yet of the same scale as our more established partners, has grown strongly - from negligible levels in 2005 to $41.9 billion in 2016. China now represents 5.3 per cent of our total FDI stock, and is Australia's fifth largest source of FDI.
As China's economy transitions from investment-led to consumption-driven growth, its investment patterns are also changing, including in Australia.
While early Chinese investment was largely centred on minerals and energy – and this remains a dominant sector for Chinese investment – we are now seeing greater diversification into infrastructure, agriculture, tourism and services.
In its 2017 report on Chinese investment in Australia, Deloitte Access Economics found Chinese investment is also contributing significantly to the Australian tourism sector, an industry expected to grow by around 400 per cent by 2033.
Tourism creates a significant downstream economic effect – for every dollar directly earned by tourism, another 82 cents is generated in other parts of the economy.
Continued investment in the tourism sector will be integral to ensuring we build the hotels and infrastructure we need to ensure this very important sector meets its growth potential.
Mr Speaker, our many strengths as a nation have driven the establishment of long-term, mutually beneficial investment relationships.
Consider the far-sighted people from Italian confectionery giant Ferrero, who chose to invest in Lithgow in New South Wales in the 1970s.
Ferrero has been one of the town's largest employers for decades, with around 100 local staff working at the site, producing Tic Tac and Nutella.
In 2013, Ferrero invested a further $70 million in Australia.
Ferrero affiliate Agri Australis is planting more than one million hazelnut trees near Narrandera, in the Riverina region of New South Wales. The goal is to develop a large-scale demonstration farm as a showcase of the potential future of hazelnut cultivation and production in Australia.
The counter-seasonal supply from Australia will provide the Ferrero Group the possibility of accessing fresh hazelnuts all year round. Agri Australis expects to reach full production capability by 2022, creating up to 50 permanent jobs and boosting the economy of regional New South Wales.
As well as creating jobs and more opportunities than we could alone, foreign investment brings to Australia new ideas and technology.
Japan's NEC, one of the world's pioneering electronics companies, has been operating and investing in Australia for almost 50 years, with local staff numbers rising from five when it opened its first office in Mulgrave in Victoria in 1969, to more than 1,800 in 2017.
Since 2014, NEC has been setting up offices, including its service centre for New South Wales Transport, on the University of Wollongong's Innovation Campus.
NEC is already employing Wollongong locals, and expects it will have at least 110 employees in time.
NEC's investment brings further benefits. NEC and the University of Wollongong are now working together to support careers for graduates, and exploring new opportunities for research collaboration.
Foreign investment flows are an endorsement and recognition of the skills of Australians and our culture of innovation.
Google employs 1,300 Australians here, and another 500 Australians overseas, giving Australians the opportunity to be at the forefront in information technology.
Germany's Bosch Group's investment in The Yield, a Tasmanian agritech start-up, is another example of Australian innovation attracting foreign investment.
The Yield measures and predicts real-time weather data at the farm, field and even plant level. It converts this into crop-specific knowledge, helping increase farm productivity, increase shelf life of produce and track food safety, with flow-on environmental benefits.
Investment is also boosting our exports.
One of our major export strengths is medical technologies. The United Kingdom's AstraZeneca has been investing in Australian manufacturing of pharmaceuticals for around 60 years.
Just this year AstraZeneca announced a further investment of around $100 million in its manufacturing facility in Macquarie Park in Sydney, creating new jobs.
From Australia, AstraZeneca is exporting to 15 countries, with exports expected to exceed $2.4 billion over the next four years.
The company's technology is a credit to Australian engineering and a world-class local workforce that is increasing productivity to meet rising demand.
International investment brings large overseas markets within the reach of small and medium sized Australian businesses too. The investment by Chinese e-commerce giant Alibaba in an Australian headquarters in Melbourne this year will provide another gateway for Australian small and medium-sized business exporters.
Investors are attracted by Australia's excellent international market access through our 10 FTAs currently in force, including the China, Korea and Japan FTAs this Government has delivered.
The value of our FTA network is demonstrated through our longstanding investment relationship with the United States, which I spoke about earlier.
Following entry into force of our US FTA in 2005, the stock of direct US investment in Australia rose steeply from $76 billion at the end of 2005 to $195 billion in 2016.
In February 2017, leading US-based Mead Johnson Nutrition Company, with whom I met in the US earlier this year, announced a $200 million acquisition of dairy spray drying, finishing and canning capabilities from Bega Cheese Limited (Bega), one of Australia's leading dairy product companies.
Bega is able to ensure continuity of supply to its own customers through a 10-year service and access agreement.
One of the drivers behind the deal is preferential access afforded by Australia's trifecta of Free Trade Agreements to export Australian dairy to high-growth Asian markets, particularly China.
For Bega, according to CEO Paul van Heerwaarden, the deal is part of an important strategic relationship, and is also about releasing capital which will be used to fund Bega's recent $460 million purchase of the Mondelez's Australian grocery business, including Vegemite.
This deal is a recognition of another important truth about foreign investment. Assets are not 'lost' overseas through foreign investment. Invariably, businesses are built up here in Australia, whether it be improvements to cattle stations, the building of resorts, or the development of brands and businesses.
In time, those assets often return to Australian hands.
Think of how the Vestey cattle empire from Britain has come and gone, or, indeed, the recent return of Vegemite to an Australian-owned company after many years of American ownership. Foreign capital comes and sometimes goes but the improvements it generates remain.
These examples of investment following trade deals shows trade and investment are two sides of the same coin. Together they deliver many benefits: more jobs, new skills and technology, more Australian exports and more Australian business engagement with global value chains.
A strong trading relationship typically supports a strong investment relationship.
Since the first iteration of the Singapore-Australia FTA (SAFTA) was signed in 2003, not only has our bilateral trade relationship grown by more than 80 per cent, our investment relationship has grown by around 350 per cent.
For these many reasons we continue to build on this Government's strong track record of achievement in delivering FTAs, be it the recent entry into force of major revisions to SAFTA, the recent agreement with Peru, ongoing work to conclude bilateral negotiations with Indonesia and Hong Kong, and our pursuit of regional agreements including TPP-11 and the Regional Comprehensive Economic Partnership, as well as deals with the Pacific Alliance group of Latin American countries, and the EU and UK.
Mr Speaker, let me turn now to how the Government is ensuring Australia maintains its strong reputation as an attractive and strong destination for global investors.
Amidst the realities of the global economy, we face intensified international competition for foreign investment and the opportunities it brings.
Global direct capital flows remain below the 2007 peak. We have also seen a marked decrease in the overall level of China's global outbound investments this year.
While the impact of these circumstances on Australia is not yet clear – we cannot take the continued availability of capital for granted.
Mr Speaker, we are getting the settings of our tax system right, which supports our competitiveness and helps to ensure Australia remains an attractive destination for investment.
We are cutting Australia's corporate tax rate – having already secured tax cuts for small and medium businesses, the Government is committed to extending the tax cuts to cover all companies in Australia.
Tax is not the only thing that matters when it comes to attracting investment; it is, however, one of the most important.
Treasury analysis shows the unweighted average company tax rate in advanced economies has fallen from 32 per cent in 2001 to 24 per cent today, and falling further with planned US tax cuts. Furthermore, with France legislating and Belgium announcing corporate tax cuts, this leaves Germany as the only other advanced economy with a higher company tax rate than Australia.
This risks our 30 per cent company tax rate being increasingly out of step with our global competitors. That's why we are urging Labor and the crossbench to help secure Australia's future prosperity by supporting a cut to 25 per cent across the board.
Meanwhile, we are continuing to implement microeconomic reforms across competition, innovation, and infrastructure policy.
These reforms, our pursuit of new high quality FTAs and continued promotion of Australia as a reliable and attractive investment destination will ensure Australia goes from strength to strength.
As Minister for Trade, Tourism and Investment, I am actively promoting Australia's investment opportunities and competitive strengths overseas by engaging with investors, and by forging strengthened bilateral relationships with key investment partners.
Mr Speaker, engaging internationally is important – we are actively pursuing a wide-ranging Economic and Commercial Diplomacy agenda at home and abroad. A key focus is to support Australian businesses making their way in the global market, as well as to promote and facilitate investment relationships around the world.
Around 90 per cent of our work in foreign investment promotion and attraction falls within the five priority sectors agreed by federal and state and territory ministers: agribusiness and food, resources and energy, advanced manufacturing, services and technologies, infrastructure and tourism.
These are sectors of strength for Australia, where we can make excellent use of foreign investment to drive benefits for Australians.
However, the investment landscape and our needs are shifting, and as this shifts, the focus within these priority sectors changes too.
Our agribusiness and food production is booming. As our output responds to the global demand for Australia's clean, green products, we are now looking at technology to drive productivity and enhance innovation and product differentiation.
As a minerals and energy superpower, with growing exports a result of recent and substantial investment – we continue to seek investment in our resources and energy sectors, including the coming surge in demand for materials used in electric vehicles and renewable energy generation and storage, such as lithium, cobalt from socially responsible sources, rare earths and high-purity nickel compounds.
In advanced manufacturing, services and technologies, we seek investment to introduce innovations in digital technology, advanced manufacturing, medical technologies and defence industry activities in naval and aerospace. A key focus is on investment and collaboration in globally competitive areas of commercial R&D, aligned with the National Innovation and Science Agenda (NISA).
In infrastructure, having successfully attracted many of the world's leading constructors and financiers, we are shifting focus to attracting greenfield investment, in rail, operators and intelligent transport systems.
For tourism infrastructure, we're encouraging investment beyond our capital cities to grow the supply of high-quality, unique experiences and iconic regional destinations – this is supporting small businesses in regional communities, with 43 cents in every tourism dollar being spent in our regions.
Just recently, Minister Canavan and I were delighted to co-host the second Northern Australia Investment Forum, in Cairns. The event attracted over 550 delegates, including over 178 executives representing 108 investor companies.
The Forum showcased investment opportunities in some of Australia's best assets: agriculture and food, resources and energy, and tourism infrastructure.
Mr Speaker, I acknowledge there are parts of the community who have concerns about some foreign investment.
Precisely because foreign investment matters so much to Australia, I encourage Australians to continue this conversation.
Through consultations over the last year, I have found Australians don't want investors to leave, but that some have mixed views concerning the sectors in which we should be attracting investment.
Where some Australians are concerned about foreign investment it is primarily in real estate, utilities and some elements of agriculture.
We have listened, Mr Speaker.
We implemented stronger rules for foreign investors owning Australian housing and improved transparency and screening of foreign investment in Australian agricultural land.
We have proposed legislative measures to strengthen the national security of our critical infrastructure. We tightened our tax rules to crack down on multinational tax avoidance and ensure profits made here are taxed here.
But we continue to welcome productive foreign investment for the many tangible benefits it delivers.
Mr Speaker, experience shows the best way to respond to change and challenge is to hold fast to the principles upon which Australia's economic success story is founded.
Openness to investment and trade is a large part of how we have achieved 26 years of uninterrupted annual economic growth.
It is part of how Australian businesses are scaling up and expanding overseas and it is how we are continuing to attract investment to provide opportunities for Australians now and into the future.
Foreign investment has made a long-term contribution to our economy.
We celebrate this through our annual Investment Award, which I presented last night at the 55th Australian Export Awards ceremony in Canberra.
This year's winner was Japan's NEC Australia. The global technology company has been in Australia for half a century and, over the past 15 years, has invested more than $200 million locally in R&D in the ICT sector.
Across the globe, competition for capital is increasing, but Australia's economy remains strong and attractive.
We have made productive use of foreign investment, generating jobs for Australians, building skills, and gaining access into lucrative and growing markets overseas for Australian businesses.
We continue to secure the confidence of foreign investors across the globe, and they will be an important part of Australia's very promising economic future.