Significant reforms to Australia’s foreign investment framework have sailed through parliament with bipartisan support, despite concerns from Labor and the tech sector that they will act as a disincentive to inward investment.
Late on Tuesday, the Senate passed the changes to Australia’s foreign investment rules, including the scrapping of the monetary threshold, with all companies now deemed to be “national security businesses” to be subject to screening, and new “call in powers” for the Treasurer to block or divest an existing investment.
The legislation defines national security businesses as “endeavours that if disrupted or carried out in a particular way may create national security risks”, and will likely apply to telcos, critical infrastructure operators, companies manufacturing defence technology for another country and those storing sensitive data.
The new rules have been criticised by local tech companies and a number of state governments for potentially introducing uncertainty around foreign investment in Australia and potentially acting as a disincentive for this.
The Opposition supported the legislation in the lower and upper houses after successfully moving an amendment requiring a review into the effectiveness of reviews to be tabled by the end of next year.
This is despite Labor raising significant concerns that the government was rushing these reforms, and that there is still little detail around how they will actually function, with the rules to be set out in legislative instruments rather than baked into the actual legislation.
“While we support the broad intent of the bill, we do have some concerns about some of the details and how some of the changes will work in practice,” shadow treasurer Jim Chalmers said when the bill was debated in the lower house last week.
“Labor’s priority is to ensure these changes strike the right balance between welcoming that foreign investment, addressing emerging national security risks and ensuring foreign investments are in the national interest overall.
“We need to give the people, the parliament, and the government of the day the opportunity to have a good look at these laws in operation and make sure they’re operating as they want to.”
The Opposition raised four key concerns around the reforms, including the lack of detail, a lack of resources to process applications for review quickly, and the timing of their implementation during Australia’s economic recovery from COVID-19.
“These uncertainties are particularly concerning given the substantial new powers and penalties that will be introduced through these bills. In our view the government should respond to these concerns raised in relation to the draft regulations and finalise the regulations as soon as possible,” Dr Chalmers said.
“The bill seeks to introduce some substantial and complex changes to our investment regime at a time of heightened economic uncertainty. We can’t afford for these changes to deter foreign investment and risk jobs as we recover from the worst economic conditions in almost a century.
“Because the government has left these changes so late, they are doing this as we recover from the worst recession in a century. That’s not a great time to be creating more uncertainty.”
Labor did successfully move an amendment in the Senate requiring a review of the reforms to be launched within a month of commencement, to be completed within 12 months. This review will consider the impacts of the changes on foreign investment in Australia, and whether they strike the right balance in protecting national security and promoting foreign investment.
The Greens also attempted to move an amendment which would require the government to keep a public register detailing the various decisions made by the Treasurer under the act, including exemptions from reviews for companies. This was voted down by the government and Labor.
The Greens also unsuccessfully attempted to amend the legislation to ensure the threshold for critical electricity assets unde the bill “does not have a disproportionate impact on renewable energy”.
In the lower house, independent MP Andrew Wilkie also tried unsuccessfully to amend the bill to include a public register of foreign investment decisions, saying the reforms hand the treasurer “unfettered discretion”.
“The bill before the House obviously provides the Treasurer with enormous power and discretion. It allows the Treasurer to impose conditions, to vary existing conditions and, as a last resort, to force the divestment of any realised investment where national security concerns are identified,” Mr Wilkie said.
“If the public is to have confidence that these powers are being wielded responsibly, we must know when and why the Treasurer uses this power and discretion. I want to know, and I think the community wants to know, what the government considers to be contrary to the national interest and what actions by foreign investors give rise to national security concerns.”
This was also voted down by Labor and the Coalition.