GLENN STEVENS: It’s OK to say no to foreign capital


Outgoing RBA governor Glenn Stevens has again taken the ball up on an important economic topic for Australia.

Amid the current debate over the sale of Ausgrid in New South Wales, complaints by land holders about who they can sell to, and calls for transparency in FIRB decisions, the clear message from Stevens, in an interview published in The Australian this morning, seems to be that it’s okay for Australia to decide what type of foreign investment it wants to accept.

In what sometimes feels like an adult conversation our policy makers in Canberra are often incapable of conducting, Stevens says that while Australia needs foreign capital, just selling existing assets is not the way to go.

“Australia wants to be open to foreign capital. That’s our national philosophy. I think in that discussion it would be helpful to think about the kind of foreign capital we want,” he said.

Crucially he highlighted the difference between the type of capital that built Australia’s productive capacity in iron ore and natural gas and that which just buys existing infrastructure or other assets.

“Foreign capital that builds new assets — like some of the capital that funded the mining boom — that’s one thing,” Stevens told The Australian.

“Foreign capital that buys up the existing assets, I’m not saying that we should be closed to that, but that’s not ­creating new capital for the ­country. That’s just altering the allocation of who owns the capital that’s here now.”

Naturally, he is right.

Mike Baird, and other owners of Australian assets might lament the inability to sell those assets to the highest bidder, regardless of nationality, but Stevens is saying that is not in the interests of the economy over the longer term.

Stevens said “when we all talk about ‘we want capital inflow’, we can probably have a bit of nuance and subtlety over what kind of inflow we mean and ask ourselves ­whether we’re attractive enough to the kind of capital that actually builds new assets”.

Stevens noted that while he’s never met a business person who doesn’t think investment by foreigners is a good thing, Australians do “get ­nervous when foreigners buy land or other assets”.

As a result, he’s calling for an adult discussion about exactly what type of capital Australia wants, or the economy needs.

“That’s why I say that maybe some more clarity about what we mean by foreign investment, what kinds of foreign investment are better than others, what kind helps us grow our capital stock and our country and how to manage all of these things, that’s probably a constructive debate we might hope to have,” he said.

You can read the full article here.