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Wednesday, 1 June 1994
Page: 1077

Senator KERNOT —My question is addressed to the Minister representing the Prime Minister. I refer to today's balance of payments figures.

Senator Cook —Hooray!

Senator KERNOT —I was going to ask Senator Cook, but I thought I could get a better answer. The figures show that one of the fastest growing outflows on our current account is profits going to foreign owners of Australia's largest companies such as Fairfax, Arnotts, Australian Meat Holdings—and soon to include half the Moomba gas pipeline and much of Qantas, courtesy of the government's policies. Does the minister acknowledge that profit outflows have gone up 40 per cent in the last two years and now exceed private interest payments made overseas? Will the Prime Minister's briefing paper on foreign debt include a recognition that open door policies encouraging foreign equity are much more expensive in the long term than the servicing of short-term debt?

Senator GARETH EVANS —I think it is a matter of appreciating that on the income side of the balance of payments account, the overall picture for the net income deficit, which takes into account both the net deficit on profit repatriation together with the net interest that is payable on debt, has fallen from 4.8 per cent of GDP in 1990-91 to just 3.6 per cent in 1992-93. The net income deficit—which includes the figure Senator Kernot is concerned about—for the first 10 months of 1993-94, the last period for which we have figures, is 1.5 per cent lower than for the same period last year. So when we look at each of these components in their larger context, we can see that they do not give rise to the sorts of concerns the senator spells out. We have to look at these things in the context of their percentage proportion of GDP. If we look at the raw figures, or the increases in the raw figures, we can be misled as to their macro-economic significance.

  The next point to make is that the increase in dividend repatriation overseas and profit repatriation is, to some extent, a function of the increase in Australian business activity overseas as well as, of course, foreign companies being active in this particular country. The point is that it is a two-way flow based on a much greater degree of overseas investment activity, both outside the country and coming into the country, than was the case previously.

  If we accept the utility, the relevance and the assistance to the Australian economy that is involved in Australian companies going offshore, investing overseas and repatriating their profits back to Australia, we have to equally accept that as part of the open international economic environment we are trying to promote there will be many companies coming to Australia and doing the same thing in reverse.

  All of this is a relatively healthy development in the international economy. We are increasingly integrated into, and part of, that economy. This is a consequence of that. As I began by saying, the particular macro-economic implications of it are not anything in particular to worry about.

Senator KERNOT —Mr President, I ask a supplementary question. I understand that we are part of this integrated world economy, but the point is: what is the long-term effect of this profit repatriation? Does it have anything to do with the national interest criterion, which is the sole criterion of this government's foreign investment policy?

Senator GARETH EVANS —We cannot both be part of an integrated world economy, which is a good thing, and not accept some of the other implications that are associated with that. If we want to have our companies investing overseas, and dragging along with those investments the trading opportunities that come from them, we have to be prepared to equally accept the utility to, and the assistance for, the Australian economy from having investment flows coming in here—offshore companies establishing headquarters in Australia or developing a level of activity here.

  It is for the overall benefit of the Australian economy that that should be the case. It does generate jobs, it does generate income in other ways for the Australian economy and, to the extent that a lot of the companies that do invest here are engaged in export generating activity, it is obviously contributing in a very large measure to the health of the Australian economy.

  It is not a matter of going through sector by sector and saying, `We do not like this kind of investment but we do like something else.' I know we have a Foreign Investment Review Board which draws some distinctions of that kind, particularly so far as residential and real estate is concerned. But overall, so far as production export activity is concerned, we welcome that investment. (Time expired)