Treasurer stands firm on foreign investment rules and effects test

The controversial recommendations were made in a draft report into agricultural red tape released by the Commission today.

The Coalition has agreed to legislate for an ‘effects test’ which the National Farmers’ Federation supports, as recommended by the Harper competition review.

But the Commission’s red tape report said existing competition regulation and oversight was “adequate” for managing the risk of major supermarkets abusing market power when dealing with farm businesses and wholesale merchants.

It said introducing an ‘effects test’ to section 46 of the Act was “unlikely to shield farm businesses from intense competition in retail food markets”.

“Suggestions to amend exemptions that allow collective bargaining under section 45 of the Competition and Consumer Act 2010 are unlikely to increase collective bargaining by farm businesses,” a report finding said.

The report also recommended the government increase the Foreign Investment Review Board’s (FIRB) screening threshold for testing agricultural land and agribusinesses investments to $252 million.

However, the Coalition lowered the levels to $15m for land acquisitions and $55m for agribusinesses in the previous parliament which Mr Morrison indicated would be retained, despite the Commission’s calls.

Today, he said the government's position on foreign investment thresholds was “unchanged”.

“We made those changes in the last term of Parliament and we remain committed absolutely to those thresholds, be it on agricultural land or any agribusiness or any of those other matters,” he said.

“The Government remains firm in its position to ensure that we have strong foreign investment rules in this country and that we enforce those rules.

“Australia is a sovereign nation and as a result we wish to promote foreign investment to this country but we promote foreign investment to this country in the national interest.”

Mr Morrison said the government also remained “absolutely committed” to pursuing its reforms in relation to the ‘affects tests’ and related measures announced earlier this year.

“There is no change whatsoever to the government's position on that matter,” he said.

Shadow Assistant Treasurer Andrew Leigh said Australia’s independent economic evaluator had “crippled the flimsy foundation” for the ‘effects test’ promised by the Turnbull government.

He said an effects test won’t protect producers, but it would raise grocery prices and threaten retailers with court action if they become too competitive.

“Labor remains opposed to the effects test as it will have a chilling effect on competition and raise prices on everyday groceries such as bread and milk,” he said.

The Coalition has implemented tougher competition laws to try and prevent potential acts of market exploitation by large retailers like Coles and Woolworths.

But the report’s Commissioner Paul Lindwall said the potential benefits to farm businesses of proposed changes to sections 45 and 46 of the Competition Act were overstated.

He said farmers were putting too much emphasis on how much these proposals may help them, in dealing with competition issues.

“Competition is important in the sector and some sort of collaborative work by farmers in terms of their dealings with major supermarkets such as Coles and Woolworths etc would probably have some benefit for them,” he said.

“But we’re not sure changes to sections 45 and 46 would actually make that much difference in practice.

“We may be wrong but these are our draft findings - and now we’re interested to hear back from the community whether they agree with that or not.”