The Greek word “xenos” refers to foreign, so when combining it with “phobia” (fear) – it refers to a fear of foreigners. But is there any reason to be phobic? Australia’s Foreign Investment Review Board has sent some very mixed messages last week in relation to the Kidman Sale, Darwin Ports, and NSW power asset Transgrid.In line with a recommendation from the Foreign Investment Review Board, Treasurer Scott Morrison has said the federal government will refuse to authorise the sale of Australia’s largest cattle holdings, S. Kidman & Co to foreign buyers. The properties, which span Queensland, South Australia, the Northern Territory and Western Australia, account for 1.3 per cent of Australia’s total land area and 2.5 per cent of agricultural land.

Kidman’s holdings include Australia’s largest cattle station, Anna Creek, located near the Woomera Prohibited Area weapons testing range. According to Mr Morrison, the size and location of the properties means selling them to a foreign buyer would be “contrary to the national interest” and the deal cannot go ahead.

Reforms to strengthen Australia’s foreign investment framework

The Government is strengthening the foreign investment framework with reforms that represent the most significant changes to the framework in over 40 years. Scheduled to commence on 1 December 2015, these reforms will strengthen the rules for residential real estate and agricultural investments. Key elements of the reforms include:

• New application fees payable by all foreign persons applying to purchase Australian real estate, which will ensure that Australian taxpayers no longer have to fund the cost of administering the screening of foreign investment applications. The fee will be calculated based on the value of the property being purchased.
• Stricter penalties will make it easier to pursue foreign investors who breach the rules. These include a new regime of civil penalties and the expansion of the existing criminal penalty regime.
• A new unit within the ATO will be established to monitor compliance and enforce the penalty regime through sophisticated data-matching systems and specialised staff with compliance expertise.
• Increased scrutiny around foreign investment in agriculture including abolishing the $5 million threshold for heritage listed commercial real estate.
• Increased transparency on the levels of foreign ownership in Australia through a comprehensive land register.

The political hot potato in all this is domestic real estate – the clear foreign interest in purchasing residential property which appears to be crowding out the native “first home buyer”. Practically speaking – new rules starting in December would see a foreigner pay a $10,000 fee for a $1m property, and a requirement to hold an FIRB “statement of no objection” before making a bid. This extra layer of red tape is required for each property, with the fee rising as the property price rises. It is hard to know if this would benefit the domestic investor, as analysts are divided as to whether prices will rise further to reflect the fee, or the market cool from the red tape.

Xenophon

We know “xenos” is Greek for foreign or strange, and “phonos” is voice. A “strange voice” has launched a Senate inquiry to consider why the FIRB isn’t involved when the States & Territories sell assets. Senator Nick Xenophon’s inquiry is considering the circumstances around the Darwin Ports and Transgrid sales – surely they too are in the National Interest.

Foreign investment is integral to Australia’s economy

Foreign investment helps to build Australia’s economy by providing capital to finance new industries and enhance existing industries, boosting infrastructure, productivity, and employment opportunities in the process. In 2014, $45 billion or 11 per cent of Australia’s capital flow was sourced from overseas. Without foreign investment we would have fewer funds available to spend on hospitals, schools, roads and other government services.

Considering how important foreign investment is to our economy, the Federal Opposition has attacked the proposed changes to foreign investment regulations, claiming that the bar has been set too high and could cause investors to go elsewhere. However, Minister for Agriculture and Water Resources Mr Barnaby Joyce has said that any suggestion Australia is opposed to foreign investment following the Kidman decision is absurd.

Mr Morrison ensured Australians that he would consider any future sale on its merits. “Foreign investment has underpinned the development of our nation and we must continue to attract the strong inflows of foreign capital that our economy requires.

“Without it, Australia’s output, employment and standard of living would all be lower.” Let’s hear the strange voice.