Wednesday 25 Nov 2020 | 02:36 | SYDNEY
Wednesday 25 Nov 2020 | 02:36 | SYDNEY

Rules for foreign investment? No need to panic


Mark Thirlwell

20 February 2008 15:12

In an editorial a couple of days ago, the Financial Times gave a fairly lukewarm reception to Treasurer Wayne Swan’s new set of principles that are to be considered in determining whether proposed investments by foreign governments are consistent with Australia's national interest. One of the FT’s concerns seems to be that by drawing up its own set of rules – rather than relying on yet-to-be-negotiated global standards – Australia risks alienating foreign investors. Given the nature of the guidelines, which largely seem to spell out the existing situation, I suspect such risks are really rather small.

Interestingly, this is not the first time that the FT has worried about Australia’s foreign investment regime and its potentially negative consequences on our attractiveness as an investment destination.  Back in February 2005, at the time of Xstrata’s bid for WMC Resources, the newspaper was calling for the scrapping of the Foreign Investment Review Board, which it denounced as a ‘protectionist relic’ that served to deter the inward investment flows needed to fund Australia’s current account deficits. Go back a bit further, and in April 2001 an FT editorial was bemoaning the decision by then-Treasurer Peter Costello to reject Shell’s bid for Woodside Petroleum on national interest grounds, warning that the ruling ‘foolishly turned national interest on its head’ and could ‘harm Australia’s fortunes’. 

Now it’s certainly fair to point out that Australia benefits in all sorts of ways from access to foreign capital, and that it would be a foolish government indeed that seriously jeopardized such access. And it’s also reasonable to argue the merits of the individual cases mentioned above.  However, the hefty inflows of foreign investment that we continue to receive suggest that any generalised worries about scaring off foreigners are overdone.  Sure, ill-judged economic policies and confiscatory government actions would deter overseas investors and impose economic costs. But the fairly modest controls and guidelines that we currently have?  Not so much.