Treasurer Jim Chalmers commits to sweeping overhaul of Australia's foreign investment system in the name of national security

Treasurer Jim Chalmers has announced an overhaul to Australia’s foreign investment system. (ABC News: Luke Stephenson)

Treasurer Jim Chalmers says Australia’s foreign investment system will receive a major overhaul in the name of national security interests.

The changes are being made to protect sensitive industries, supply chains, critical infrastructure, data, and critical minerals. Details of substantial changes to the system will be announced in full on Wednesday when Mr Chalmers makes a speech at Lowy Institute.

“What I’m intending to announce tomorrow is a major overhaul of our foreign investment framework,” Mr Chalmers told 7.30.

“We are worried about losing control of supply chains. We’re worried about losing resilience where there is the capacity for interference.”

Mr Chalmers said he will make changes to the current vetting process including a more robust examination of how proposed projects “relate to our national interest”.

“If a supply chain or an industry is controlled more by overseas interests, it has the capacity to be manipulated or to be interfered with.

“[And] in some cases, the most extreme cases to attract sabotage or espionage.

“We need to be very careful about that, particularly in our critical industries, whether it’s critical minerals, critical data, critical infrastructure.”

Asked whether changes to the system were directed at China, the treasurer said the government was not focusing on one country or another: “The tests that we apply to investments, apply equally to investments from all parts of the world.

“Where there’s investment in sensitive areas, or in sensitive places, or sensitive industries, people can expect that to attract much more scrutiny.”

Mr Chalmers told 7.30 the overhaul will allow Treasury to better differentiate between low and high-risk investments so that the application approval process can be sped up for deals that are “in the national interest.”

He said investment proposals will be categorised according to the risk they pose.

“It’s about making sure we streamline the less risky investment, so we can devote much more time, energy and resources to screening some of the investment proposals that we get, which may not be after close scrutiny and examination, consistent with our national interests, or our national economic goals.”

Treasury officials to visit sites

As part of the reform Mr Chalmers said there will be more resources for Treasury officials to be able to conduct on-site visits of foreign projects, and ensure compliance with government requirements.

“It’s just one of a suite of tools that we want to make more substantial when it comes to the scrutiny on foreign investment,” he said.

“Sometimes when foreign investment bids are approved — in fairness by governments of either political persuasion — there are a series of conditions imposed on that.

“We want to make sure we’ve got the resources to actually enforce those conditions.”

Beefing-up government powers

Asked whether other agencies, including ASIO, might participate in the on-site visits, the treasurer said he is reluctant to discuss “operational issues”.

Mr Chalmers will also beef-up existing “call in powers” which currently allows the government to review an existing foreign investment project over the course of 10 years due to national security concerns.

“I’m talking about making that power more robustly applied and enforced,” he told 7.30.

“No investment stays exactly the same over a long period of time.

“So any normal self-respecting country like Australia should have the ability to go back into those deals, if that’s necessary.

“The changes I’ll announce tomorrow will be a bit about beefing that up, but also having a much more robust information base to make those kinds of often difficult decisions.”

The reforms are expected also to ensure foreign investors pay a fair share of tax.

The overhaul comes just a fortnight before the Albanese government hands down its 2024 budget, which the treasurer says will once again focus on the nation’s economic security.

“We’ll have the usual emphasis on responsibility on fighting inflation in the here and now but there’ll be a much bigger emphasis on economic security.”

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