Yesterday afternoon, Treasurer Scott Morrison blocked the sale of Australia’s biggest electricity grid – Ausgrid – to foreign buyers on national security grounds. From The Canberra Times:
Two bidders, the Chinese government-owned State Grid Corporation and the Hong Kong-based company Cheung Kong Infrastructure, had been in the running to secure the 99-year lease for the 50.4 per cent stake, in a deal that was expected to be worth about $10 billion to the state government.
Mr Morrison said on Thursday that, after carefully considering the two bids, “my preliminary view is that the foreign investment proposals put to me for this transaction are contrary to the national interest, in accordance with the required provision on the grounds of national security”.
“I have invited the bidders to make submissions to me by 18 August 2016 in order to make a final decision after that time.”
Good news. Selling-off a strategic monopoly asset to the Chinese Government makes little sense. The Chinese have already shown a penchant for flexing their muscle, as illustrated in the South China Sea dispute, so do we really want them owning our essential assets? Would China let Australia own its critical infrastructure?
At the worst, the Chinese Government may be able “to flick the switch-off” on the country’s largest city and its stock exchange. At best, having the Chinese own a significant chunk of our assets – from farms, to essential utilities, to real estate – could hinder our policy sovereignty, which will increasingly kowtow to our Chinese owners, putting at risk our traditional alliances (e.g. with the US).
There are also the broader macroeconomic impacts of flogging-off more and more of our assets. Australia cannot sell the kitchen sink to China without driving up our real exchange rate and diverging from the alternative path which is to repair the real exchange rate and build productive businesses. In short, if we take this path then Australia will have to keep selling those assets as our productive tradable businesses continue to disappear.
Personally, I’d prefer to only see significant foreign ownership when it is accompanied by genuine investment (capital deepening), since this is what actually adds to the nation’s productive capacity.
If a foreign entity wants to set-up a factory or a new industry in Australia. Fantastic. But if it merely wishes to buy an existing asset (home, farm, utility, etc) and not undertake any productive enhancements, then it should be disallowed. Otherwise, Australia is ‘selling the family jewels’ and our children’s future, pure and simple.
In any event, I cannot foresee a public backlash against Treasurer Morrison’s interim decision on Ausgrid – quite the opposite in fact. The overwhelming majority of Australians seem to be wary of expanded foreign ownership and (more importantly) foreign control, and for good reason.
