OPINION: Australia’s foreign investment signals are a little confused.
Despite Australia’s historical commitment to free trade, and even despite the current government’s track record, Australia will struggle to attract foreign investment as long as it tries to pander to a growing protectionist base in Australian society – and in the Parliament.
We know from our experience with Chinese investors that they’re very concerned about a wave of populist sentiment sweeping the globe. Brexit, the rise of Trump, and the odd resurgence of One Nation as a force in Australian politics has Chinese investors worried about Australia as an investment destination.
It’s incumbent on the Coalition Government not to fall prey to the populist temptation. It’s easy to pander to the electorate’s fears, and Scott Morrison’s decision to block the sale of Ausgrid to both the Chinese Government-owned State Grid and the Hong Kong-listed Cheung Kong Infrastructure, citing national security concerns, is just that.
Whether or not ‘national security’ is a good enough justification for the decision, its consequences will have far-reaching implications for Australian business, and we suspect it’s small business who has the most to lose.
China is actively seeking to engage in mutually beneficial trade. Its ‘One Belt, One Road’ policy opens opportunities for infrastructure development in Northern Australia – an area that desperately needs it. And as we’ve seen in the dairy and pharmaceutical industries, Chinese consumers are willing to pay a premium for high quality, clean and green Australian products.
Small and medium sized businesses in Australia are already taking advantage of Chinese demand in these industries – demand for Swisse and Blackmores vitamins in China are so high that Australian resellers are developing models to target sales through Chinese e- and social commerce sites.
But there are opportunities for Australian high-value manufacturers to take advantage of the Chinese demand for all things high tech and environmentally friendly. The dispersal of this manufacturing across the country, and in growth areas, means that Australia could stand to benefit from trade and investment in a far more balanced way than during the mining boom – where the chief benefit went to WA’s iron ore industry.
But that can’t happen without public signals from the government that Chinese investment is a definite good for the economy. Australia has a long history of driving both multilateral and bilateral free trade agreements and negotiations, especially within the Asia-Pacific region. The current Liberal government, under the since-retired Trade Minister Andrew Robb, concluded successful trade deals with China, Japan and Korea that have been a long time in the making.
ChAFTA was a good first step, but attitudes, commitment and mutual respect are important qualities for doing business in China.
We’re already seeing a dip in Chinese property investment as Chinese developers continue to come under attack by the government in the media and the state governments introducing or increasing taxes and surcharges on foreign investors. This is off the back of the banks’ sudden policy changes on lending to foreign property purchases.
All this isn’t a sign that says Australia is open for business and welcoming investment.
And neither is implying that China’s interest in electricity grid assets is a national security threat. Comments like that do not make for a positive and respectful trading relationship – and it isn’t like China has any shortage of willing trading partners.
By Andrew Clugston and Michael Langhammer, Pitcher Partners.*
Australian Property Journal
