Treasurer Scott Morrison is coming under increasing pressure to review laws that have allowed the states to flog-off vital infrastructure assets to foreigners.
Amid controversy over the deal to offload the Port of Darwin to Chinese interests, along with the State Grid Corporation of China’s interest in purchasing the $8 billion Transgrid poles and wires from the New South Wales Government, Morrison has proposed reforms to the process for selling state government-owned assets. From The ABC:
“There are some consultations talking place at the moment with states and territories in relation to those matters,” he said.
“There are constitutional issues around the sovereignty around particular critical infrastructure assets which are held by states and territories, so it’s not something the Commonwealth Government can simply move on unilaterally.”
Meanwhile, Peter Jennings, executive director of the Australian Strategic Policy Institute, is urging the Government not to repeat the process that led to the leasing of Darwin’s port to a Chinese-owned company:
“There are a number of important critical infrastructure decisions that are coming up, including the privatisation of the electricity transmission infrastructure in New South Wales,” Mr Jennings told AM.
“We ought to make sure going forward these issues are given the appropriate consideration at every level of government.”
Mr Jennings was the author of an influential report highlighting national security concerns over the decision to grant Landbridge a 99-year lease over the port…
“For those who are watching China, well this is just another example of how it is looking to demonstrate its interests and its power on a much wider geographic sale,” he said.
Seriously, what did the Government expect? Since gaining office, it has encouraged the state governments to sell-off essential infrastructure without giving due regard to longer-term consequences. Heck, it has even provided federal government incentives to the states via its asset recycling program.
This is despite the Productivity Commission last year warning that asset recycling “could act to encourage privatisation in circumstances that are not fully justified and encourage the selection of new projects that do not have demonstrable net benefits”.
More generally, this latest episode once again highlights the inherent problems with Australia’s foreign investment regime: namely that it doesn’t properly distinguish between genuine investment and the transfer of ownership whereby no real investment (capital deepening) takes place.
Genuine foreign investment, such as the building of factories and infrastructure, adds to the nation’s productive capacity and employment, and should be encouraged. By contrast, merely transferring ownership of an existing asset to foreign interests is akin to “selling the family jewels”. It does nothing to improve the economy and living standards, and should be discouraged.
It also goes to the short-sighted nature of the Australian economic model of relying upon housing leverage and the population ponzi to drive growth. When the offshore debt for the former has to be guaranteed by the Budget it disqualifies it from fiscal expansion to build infrastructure for the growing population and forces us to flog assets as the only way to fund basic capacity expansions.
Unfortunately, too much “foreign investment” in Australia is really just “foreign ownership”. And much of it involves our established homes, our farms, and now our essential infrastructure assets.
We are selling-off our children’s future and if we are not careful, Australians risk becoming tenants and serfs in our own country.