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Economics Legislation Committee
18/11/2020

DEITZ, Mr Andrew, Branch Head, Policy and National Security Branch, Foreign Investment Division, Treasury

HAMILTON, Mr Tom, Division Head, Foreign Investment Division, Treasury

IRVINE, Mr David, Chair, Foreign Investment Review Board

KELLEY, Ms Roxanne, Deputy Secretary, Corporate and Foreign Investment, Treasury

[15:35]

CHAIR: I welcome representatives of the Treasury. Thank you for appearing before the committee today. Information on the procedural rules governing public hearings has been provided to witnesses and is available from the secretariat. I advise that answers to questions on notice are required by midday on 20 November. We'll be happy to have some opening remarks.

Ms Kelley : Thank you for the opportunity to appear today and to make this opening statement. I'd like to use this opportunity to update the committee on recent developments in the foreign investment review landscape, and particularly to provide further detail on the reforms to Australia's foreign investment legislation and the outcome of recent consultations.

On 28 October 2020, the government introduced to parliament the Foreign Investment Reform (Protecting Australia's National Security) Bill 2020 and the Foreign Acquisitions and Takeovers Fees Imposition Amendment Bill 2020. This package of bills, along with its accompanying regulations, will ensure that Australia's foreign investment review framework is equipped to keep pace with emerging risks and global developments while continuing to welcome and be open to foreign investment. The proposed package achieves this balance by addressing national security risks, strengthening compliance and enforcement powers, streamlining certain approvals, addressing technical legislative loopholes and implementing a fairer and simpler fee regime.

Before I go into detail on some of the specifics of the reforms, I would like to provide context on why they're needed.

Senator O'NEILL: Chair, can I interrupt for a moment? Ms Kelley, is there any chance I might be able to get a copy of your opening remarks? Has a copy been provided to the secretariat?

Ms Kelley : I believe we were sending a copy through.

Senator O'NEILL: Thank you. That would be helpful. Please continue.

Ms Kelley : Foreign investment is important for Australia's long-term economic success, stability and prosperity. It creates jobs, improves productivity and connects Australian businesses to global markets. At the same time, Australia is an attractive destination for foreign investors thanks to our stable democracy, strong rule of law, highly skilled and highly educated workforce, proximity to dynamic and fast-growing markets, abundant natural resources and world-class industry capabilities, and strong and well-managed economy. This is evidenced by the foreign direct investment inflows relative to the size of our economy. In the three years to 2019, foreign direct investment inflows into Australia averaged 3.3 per cent of GDP, compared with 1.7 per cent for the OECD and 1.5 per cent for the G20.

For some time we have recognised that the current framework requires updating. The risks associated with foreign investment have increased and evolved amid rapid changes in technology and the geopolitical landscape. Australia is not alone in recognising and responding to these risks. Many other countries, including Canada, China, the European Union, India, Japan, New Zealand, the United Kingdom and the USA, have recently updated their foreign investment rules. Only last week, the UK government introduced the National Security and Investment Bill into the British parliament, a bill that introduces new foreign powers to screen national security risks in foreign investments. Because of the changing risk environment, we are consulting more with our security agency partners on foreign investment applications and we are imposing conditions on more approvals. For example, in 2018-19 the Australian Security Intelligence Organisation undertook 275 foreign investment assessments, a 12 per cent increase on the previous year. Currently, conditions are applied to 47 per cent of investment approvals to mitigate national interest risks.

Along with increased scrutiny of cases at the screening stage, there is a need for enhanced compliance and enforcement powers to align the framework with other business regulators and to ensure that credible monitoring and enforcement is maintained. For these changes to work, legislative reform is not enough. Further resources are needed to ensure the integrity of our screening and compliance arrangements. Recognising this, the July Economic and Fiscal Update included $62.8 million in additional funding over four years to support the foreign investment reforms. This was followed by the 2021 budget, which allocated $86.3 million over four years to implement a new information technology system to support more effective and efficient foreign investment application processing, case management and compliance activities, as well as the new register for foreign ownership.

Updates to the fee framework proposed in this reform package will ensure that the cost of administering the foreign investment review framework continues to be borne by foreign investors, but in a way that is simpler and fairer. The maximum fee for a commercial transaction over $50 million will not be higher than 0.03 per cent of the consideration; for agricultural land over $2 million, it will not be higher than 0.66 per cent; and for residential real estate investments over $1 million, it will not be higher than 1.32 per cent. The different fee treatments between commercial, agricultural and residential investments are not new. They are consistent with the fee structure adopted under the foreign investment reforms that parliament passed in 2015.

We have increased screening during the coronavirus, but we've kept processing times in check. Work on reforms to the framework was well progressed by the time coronavirus struck earlier this year. Aware of the pressure the coronavirus would impose on the economy and businesses, the government temporarily reduced all screening thresholds to zero dollars to ensure it had adequate scrutiny of proposed foreign investments during this period. Recognising this would likely increase our case load, we also said we would work with applicants to extend processing times to six months to ensure adequate time for screening, but at the same time we took steps to manage the increased workload, including by adding staff and introducing risk-based triaging. For instance, the number of ongoing and non-ongoing employees in the Foreign Investment Division increased from 68 at the beginning of the year to 114 in October, plus 83 surge staff. Most of this increase was in the case branch, where staffing has increased fourfold to date this year. As previously noted in evidence to other parliamentary committees, we have also established a compliance branch with current staffing at 17.4 FTE and recruitment under way to have 30 FTE by January 2021.

Case volumes did increase, as they were intended to. Preliminary figures show Treasury received 2,419 applications in the year to October 2020, compared with 1,280 in the equivalent period last year. By 8 November 2020 Treasury had 682 cases on hand, of which 236 are estimated to be from the zero-dollar screening thresholds. Yet the increase in the case processing times has been relatively small, and much less than the six months that we planned. For instance, in the September quarter 2020, Treasury took a median of 46 days to process applications. That compares with a median of 40 days to process applications in the September quarter last year and a median of 48 days across last financial year.

While zero-dollar threshold screening has enabled greater scrutiny of foreign investment, early signs suggest that it has not impaired inflows. We do not yet have robust data on foreign investment inflows during coronavirus, but there are early indications that inflows have remained relatively healthy. Of the 2,419 applications we have received to October this year, 1,450 would have been received even without zero-dollar screening. That is more than the 1,200 applications received in the equivalent period last year. These are encouraging numbers, particularly when seen in light of estimates from the United Nations Conference on Trade and Development that global foreign direct investment flows fell 49 per cent in first half of 2020 compared to 2019.

I'll now outline some further detail on the key aspects of the legislative reforms. On national security, the existing foreign investment framework has gaps in its capacity to address national security risks. Under the national security test, investments that meet the definition of 'national security business' or 'national security land' will be subject to a mandatory notification, irrespective of their value. This will provide a degree of certainty to investors about what types of investments need government approval pre-acquisition. The mandatory requirement is complemented by the call-in power, which will allow for investments that wouldn't otherwise have to notify to be called in for review. To obtain certainty and prevent the use of this call-in power, investors will have the option to voluntarily notify of a transaction. The call-in power will be limited to circumstances where a national security risk is involved. The Treasury will provide investors with guidance, including on likely scenarios that would lead to a transaction being called in and when investors should consider voluntarily notifying. Finally, the additional national security powers will include the ability to conduct a last-resort review of a previously approved transaction. This power would only be available on national security grounds and will be used only in exceptional circumstances.

As I mentioned earlier, the use of conditions on cases has been steadily increasing as the complexity of foreign investment increases. The efficacy of these conditions hinges on a strong compliance and enforcement framework. The main changes to the legislation that will help ensure a strong compliance and enforcement regime include increasing penalties for infringements of the act and tying penalties to the consideration of investments; enabling approvals to be revoked if false or misleading information is given in an application; and granting the Treasurer and Treasury standard monitoring, investigating and enforcement powers that will align them with comparable regulatory bodies.

In recognising the many benefits of foreign investment, the new reforms will reduce regulatory burden by streamlining certain low-risk transactions. This will be achieved primarily through exempting certain investments that are made by entities which are currently classified as foreign government investors. This will only apply to applicants where it is clear that no foreign government has influenced or controlled, or could be perceived to influence or control, the applicant. It mainly refers to passive funds, and it exempts revenue streams in relation to mining and production tenements and exempting acquisitions of interests in land acquired by private investors as a result of obtaining a right in an exploration tenement unless the land includes national security land.

In terms of consultation and response, we have conducted extensive consultations on this reform package, engaging with close to 1,000 stakeholders during each consultation period. A month-long consultation period for the draft bill garnered 54 submissions. This was followed by a two-week consultation period for the draft regulations, which garnered a further 43 submissions. Through these consultations, stakeholders were supportive of the rationale for reforms. Feedback focused on a number of issues, including investor certainty, transparency, the fee structure and efficient operation of the system. In response to this feedback, we made a number of adjustments to the bill, including adding further safeguards to the use of the last-resort power; revising the changes to share buybacks and other forms of capital reductions to reduce the regulatory burden on investors; and consolidating registration obligations associated with the new register of foreign ownership of Australian assets, again to reduce the regulatory burden on investments.

I trust my comments provide the committee with further insights into the reform package. We are happy to take any questions. I note that Mr David Irvine, chair of the Foreign Investment Review Board, is here with us today and is only available until around four o'clock.

CHAIR: Thank you very much for that. It was probably slightly more comprehensive than we usually like at committee hearings, but there was a lot of good information in there, so I think that gives us somewhere to go. I will start off with a couple of questions and then I'll hand over to Senator O'Neill. Obviously, you've talked through the consultation with business, but, as you perhaps managed to hear this morning, some of the business groups seemed to indicate that they felt some of their concerns were not being listened to. Can you talk us through the changes to the application process and the streamlining of the application process, how that actually works in practice and how that will potentially make things easier, at least for some businesses?

Mr Deitz : The changes that the government is making on the streamlining side will ensure that certain investors who meet the streamlining criteria no longer need to apply for investments that they otherwise would have had to apply for. The main area that I'm referring to there, as Ms Kelly has already outlined, is the treatment of certain private investors as foreign government investors under the regulations which accompany the act. The change to that definition was subject to consultation. We received some useful feedback from investors as to how better to target what we mean by 'influence or control', and that is something which we are taking on board as we finalise those regulations. So that is an example of an area where we've taken feedback on board.

Senator O'NEILL: Chair, that's a great question. Can I ask for clarification, though, on the answer? I still don't quite understand the private investors that you are referring to there. Can you give me a more plain-English, vanilla version?

Mr Deitz : The private investors we're referring to are typically investment funds. They hold money on behalf of other investors. Investors participate in their fund. The private investor typically controls that investment. By virtue of the way the regulations treat those funds, they look through the private investor and examine the underlying investor base. Those underlying investors, in many circumstances, have no influence or control over the decisions of the private investment fund. Often these are the world's largest global equity funds, so they are controlled in practice by a private investor, but they are treated as a foreign government investor by virtue of the way the regulations are drafted. The adjustment recognises that a foreign government is not in control of these funds. That doesn't mean that they're not screened; it just means that they are no longer treated as a foreign government investor, so are no longer screened from zero dollars. Instead, the private investment fund is able to access the higher thresholds for private investors, whether that be $275 million or $1.2 billion, depending upon the nature of the fund and where it originates.

Senator O'NEILL: That test is jurisdiction blind? It doesn't matter where that comes from?

Mr Deitz : That's right. The different threshold is based on whether it's from an FTA country or not.

CHAIR: I have some questions myself, but I'm conscious that you, Mr Irvine, have to leave at 4 pm, so that's not very long. I know Senator McAllister has questions for Mr Irvine.

Senator McALLISTER: Thanks very much to the witnesses for being present. Mr Irvine, a number of the witnesses today have expressed concern about the potential inclusion of certain kinds of businesses within the definition of a 'national security business', and that has highlighted for me that there may not be sufficient clarity about what the actual problem is that we're trying to solve. In the opening remarks, Treasury made references to the changing risk profile, the fact that there are new risks, that we need to update our legislation to deal with new risks. I'm wondering how you would, at the highest level, characterise the categories of risk that this framework overall is seeking to address.

Mr Irvine : I do apologise for having to rush off. I can probably go a bit after four. I have a prior engagement that I simply can't miss. If we look at the concept of national security risk, we are essentially looking at the security of our critical infrastructure and to some extent the security of our defence capabilities and—sorry, to some extent the security of sensitive data, including data about Australians. Why are we concerned about those risks, whereas 10, 15, 20 years ago they didn't really enter into consideration of foreign investment thinking to any great extent? The first is that we know now that with the advance of technology many of the areas of investment that didn't previously contain risk, now do. The ability to conduct espionage on a state based basis, the ability to sabotage your critical infrastructure, particularly by cybermeans but by other means as well, is something that in the national interest now has to be taken into account in a way that it wasn't when state governments owned most of our critical infrastructure. That's one set of issues at the very broadest level. Similarly, with the protection of data, be it sensitive national data or sensitive personal data, I think there is a need to ensure that foreign investment doesn't become a vehicle for jeopardising those elements of our national security. That's the short answer.

Senator McALLISTER: Thanks, Mr Irvine. May I ask a follow-up question? That characterisation broadly aligns with the way that the Productivity Commission characterised national security threats in their recent research paper, although they have an additional one, which is:

dependency on foreign-controlled suppliers, creating opportunities for the supplier to delay, deny, or place conditions on the provision of crucial goods or services

Is that a feature of the FIRB's thinking in relation to national security in the context of this legislation?

Mr Irvine : Increasingly it is coming into play in relation to certain processes, certain technologies or whatever, yes. I might just add, when the Foreign Investment Review Board looks at a proposal we look at it from five or six different aspects. We look at it from the point of view of whether there's going to be economic benefit, or be no detriment to the national economy. We look at it from the point of view of what public impact it might have on public attitudes and so on, because one of the roles of the FIRB is to provide assurance to the public that foreign investment is being carefully monitored and looked at, and that's a need I think the public has. We look at competition policy. Competition policy doesn't simply mean, in my view anyway, whether or not you're going to have a monopoly and give a foreign investor a monopoly in a certain line of business in Australia. But also I see our foreign investment principles as consistent with government policy in increasing competition internationally. Of course, we also look at taxation policy and we look at the character of the investor and, as we've said more recently, we look increasingly at the national security aspects of investment.

Senator McALLISTER: In relation to this question of supply chains and how dominant supply chains might feature in FIRB's thinking about mergers and acquisitions, some of the questions that are being raised by stakeholders go to a lack of information about what government's objective might be in relation to supply chains. There's been significant public discussion about it, obviously, over the course of the last 12 months in particular. But we're yet to understand how the government thinks about supply chains that are crucial and others which we are content to leave to market forces. Has the FIRB given any thought to how much a distinction might be developed?

Mr Irvine : We have certainly considered those sorts of questions, but we work on the basis that the overall policy is going to be determined by the government, and if the government seeks the views of the Foreign Investment Review Board—as it has done on a number of issues related to and including the current legislation—we would be prepared, I'm sure, to offer views. We've been very careful, and I suspect the government's been very careful not to box itself in by being too prescriptive in nominating a particular sector or a particular element of a sector, simply because, from our experience looking at hundreds and hundreds and hundreds of cases every year, no case is similar. And the national interest is subtly different in each case and requires different consideration. On the face of it, what you're suggesting makes a lot of sense, and it makes a lot of sense to me. It's actually more difficult to do in practice without becoming overly prescriptive and boxing yourself in, and thereby hindering your ability to apply the most appropriate solution on a case-by-case basis.

Senator O'NEILL: This probably follows on from where we have just left off with Senator McAllister. I understand the Foreign Investment Review Board's action most clearly from my work around Alinta Energy, and I know that you were involved in that so I'm going to ask a question in that frame. I don't ask you to respond in the particular if you don't wish to; please answer more generally if that's more appropriate. There have been issues around monitoring within Treasury with regard to conditions that were set. We've had evidence today of a significant increase in staffing of the monitoring; in fact, it's 15 times higher than it was at the beginning of 2019 if you achieve your goal of 30 FTE by January 2021. There's been a massive escalation there. You've just spoken about the particularity of decision making in terms of your recommendation to the Treasurer, who is the one who ticks it off. Mr Irvine, my understanding is that when Alinta was approved with conditions, you actually went to Hong Kong and met with—is it Mr Cheng?

Mr Irvine : I can't remember the name, but yes.

Senator O'NEILL: Mr Cheng from Chow Tai Fook, now the owner of Alinta Energy. Is that the level of engagement that you generally have with an entity such as a—supposedly—privately owned company operating in Hong Kong that's very much associated in evidence with the Chinese Communist Party?

Mr Irvine : I visited Hong Kong and China in the pursuit of the primary role—and people forget this—of the Foreign Investment Review Board, which is to facilitate investment, in the course of which I had a meeting with the leadership of that company, and I raised with them the issue of their compliance with the conditions that had been established. They were aware of their non-compliance and were endeavouring to do something about it. But I didn't think it inappropriate, in terms of the fact I was meeting them, to raise a particular issue which we had with that company.

Senator O'NEILL: One of the concerns that's been raised is the 10-year opportunity for the Treasurer to call something back in. I mean, he's got more powers than that. As of today, perhaps, Chow Tai Fook—now the owner of Alinta—are compliant, but that's four years that have passed, and they have to the end of the year to comply. What is your view about the timing of all of this, Mr Irvine? It has taken four years for Alinta to comply, and we do know that, as an energy provider, it is a critical infrastructure asset. What does that say to the capacity of Treasury to act as an enforcement agency rather than just a policy adviser, and what does it say to concerns about time lag in compliance?

Mr Irvine : One of the purposes of this legislation is, in fact, to improve the ability of the government to enforce compliance—to improve its monitoring capabilities and its investigative capabilities and to insist on compliance with potential penalties. So what this legislation is doing is remediating a defect, if you like, and certainly an incapacity in the past to be as comprehensive in ensuring compliance as the previous legislation permitted. So whether it's three years, four years, five years or 10 years in terms of the time for the call back, I think that's a different question.

Senator O'NEILL: I suppose, Mr Irvine, you'd be aware of Professor Allan Fels' view about the need for a statutory independent authority—or, his articulation on that as a model—to enable a truly independent body to operate such a regulatory regime, rather than sitting it within Treasury. As I understand it, the Foreign Investment Review Board is an advisory body, and its function has been to advise the Treasurer. That's quite a different historical role from what it looks like is being shaped up going forward. Is it anticipated that the Foreign Investment Review Board will be the key driver of making enforcement happen, or is that going to sit somewhere else in Treasury? How do you see all these changes intersecting if the legislation is passed in the coming days?

Mr Irvine : It's always difficult to disagree with such an august, distinguished personality as Mr Fels, but I do. The advisory role of the Foreign Investment Review Board is based on the fact that, if you like, a philosophical decision has been made that, ultimately, foreign investment decisions are best made by the elected government rather than an independent statutory body. That's the first thing. The second thing is that, in fact, there have been very, very few rejections, over a long period of time, of investment applications—very few. The third point I would make is that the Foreign Investment Review Board—okay, so it only offers advice; but it offers advice that's pretty frequently listened to—is in fact an independent body. It's appointed by the government; but so would the members of a statutory organisation be. What you're really asking is: should the Foreign Investment Review Board have powers separate from the Treasury and the Treasurer?

Senator O'NEILL: Yes, that's one way. Perhaps my question is: should the Foreign Investment Review Board continue to do what it does, which is to advise the Treasurer, and should the enforcement agency—of whatever is discerned—sit outside as a statutory entity that enforces?

Mr Irvine : At the present time, the Foreign Investment Review Board relies very heavily on the Treasury for the support activities, and Treasury consults frequently with the Foreign Investment Review Board. My sense is that giving the Treasury powers of a regulator in many ways, which this bill does, still actually involves the Foreign Investment Review Board. We are still consulted. We still provide opinions. We have the power, if you like, to provide advice to Treasury saying, 'You should do this,' or, 'You should do that,' including, I would think, in relation to the follow-up monitoring activities, as we've done in the past.

CHAIR: Senator O'Neill, I think we probably should give Mr Irvine at least the option to depart if he needs to.

Mr Irvine : Before I do, can I just make a more general point. I've said that the Foreign Investment Review Board sees its primary role as facilitating investment, and the number of applications that have been knocked back over the years is actually very small. It's not the desire of the Foreign Investment Review Board, which is actually made up mostly of businesspeople or people with extensive business experience, to put unnecessary obstacles in the way of foreign investment into Australia—we know its importance—nor are we intending to put unnecessary obstacles in the way of, if you like, foreign investor confidence in Australia. The changes in technology and the nature of investment have obviously drawn national security issues into it. The FIRB was closely involved in the development of these reforms, and my message to you is that we support them. We've carefully weighed up the various risk equations in the reforms between our national security responsibilities, if you like, and our responsibilities for the facilitation of investment. The next thing I would say, very briefly—

Senator O'NEILL: Mr Irvine, before you go on, can I just ask: if the reality is as you describe it—that you have not rejected very much investment inquiry into Australia in recent times—where is the urgency for this legislation to protect our national security coming from? I can't understand the pace at which this is advancing, particularly given the concerns expressed by the business sector today about a tax being imposed on them, about interruptions to the flow of capital into the country and about a flight of capital from Australia for the first time since 1972. Those things don't gel for me.

Mr Irvine : First of all, you have to ask yourselves: have investment flows been impacted as a result of this impending legislation? I can't answer that question. Have they been impacted by COVID? That's another issue. How significant is the fee issue that people are complaining about in the overall scheme of things? What do the complainants say to you? Yes, very large investments will incur a greater fee, but investments under $150 million will actually incur a lesser fee. The Foreign Investment Review Board has weighed those issues up and, as a result, supports the legislation as it is. As to the haste, it may or may not be seemly, but I am of the understanding that Treasury officials have conducted quite extensive consultations with industry, and I myself have gone out to the sector very extensively to explain and listen. You can ask the government about haste.

Senator O'NEILL: I'm sure you'll be interested in some of the evidence from this morning, Mr Irvine.

CHAIR: I have given you the opportunity, Mr Irvine. You're welcome to stay, but if you need to leave—

Mr Irvine : I just want to add one further point, and that is that there needs to be a sense of perspective in all of this. I personally don't believe, and I don't think my board believes, that these reforms are ultimately going to make investment in Australia any less attractive. The first thing to say is that a lot of our competitors for investment—India, the UK, Taiwan, Japan, Korea, the United States and New Zealand—are all considering similar sorts of measures to monitor and control investment primarily for national security reasons. Then I would say this: the reasons why people invest in Australia and want to invest in Australia haven't changed all that much. We have political stability—I'll let you debate that!—we have the rule of law, we have advanced and reliable infrastructure and we have a relatively high-quality workforce. In other words, we have high levels of predictability for investment and, above all, we still have opportunity.

Senator O'NEILL: But we have reliable infrastructure that you've described as an asset that is now said to be under such threat that we have to put in new legislation to protect it, and we have to do it with haste.

Mr Irvine : I would rather step in early and get it done and protected, rather than, as it were, wait for a disaster to come to a burning platform near you.

Senator O'NEILL: I think that might have already happened with Alinta, with 1.1 million Australians' identities, because there was a failure of response from this government.

Mr Irvine : But you also need to ask yourself in that case: when Alinta was in Australian hands, where was that data stored?

CHAIR: I think we're getting slightly off the legislation now. Mr Irvine, thank you very much for your time. We will keep going with the Treasury officials.

Senator O'NEILL: Can I run through a series of questions. There may be a little overlap, but I want to make sure I get a response to all of these on the record. What kinds of sectors are likely to raise national security risks that are currently not covered? This goes to Senator McAllister's question somewhat. What's the rationale for the new security tests? This is the problem.

Mr Hamilton : I will kick off, and then my colleagues may wish to add to my answer. As you know, in the legislation we've identified a number of national security lands which we think it is important that the legislation cover. In relation to land: Defence premises, including all land owned or occupied by Defence, including land, buildings, structures and prohibited areas; land in which an agency in the national intelligence community has an interest; and land declared by the Treasurer by legislative instrument to be national security land.

Senator O'NEILL: Does that include land that sits adjacent to defence establishments and/or critical infrastructure sites?

Mr Hamilton : In relation to critical infrastructure sites, the responsible entities and direct interest holders of critical infrastructure assets as defined in the Security of Critical Infrastructure Act will be covered as national security businesses. Those endeavours that are disrupted or carried out in a particular way could create national security risks. We also are defining those businesses as carriers or carriage service providers to which the Telecommunications Act 1997 applies; businesses that develop, manufacture or supply critical goods or technology for or intended for a military end use by defence and intelligence personnel or the defence force of another country; businesses that provide or intend to provide services to defence and intelligence personnel or the defence force of another country; businesses that store or have access to information that has a security classification; and businesses that store, maintain or have access to personal information collected by the Australian Defence Force, the defence department or an agency in the national intelligence community. They're important to define, because a foreign investor proposing to take an interest in those assets must seek foreign investment approval before taking the action. So we have provided some definition around what businesses and land are covered. In addition, as you know, to those notifiable national security actions, the Treasurer's going to have the power to call in investments that the Treasurer considers may pose a national security risk. That's important for us because it means that we have the ability to consider national security risks that have emerged over time—I think this gets to the point that Mr Irvine made around flexibility in our system—so if we don't anticipate a risk, we can respond to it over the course of time through working with our consult partners to identify where there may be risks and call it in. So we have provided some definition around what we think are businesses, but we've also provided the agility and flexibility of the new framework to respond to developments over time.

Senator O'NEILL: Is that why so much is ill defined in the legislation? One of the big criticisms we had today was about definitional ambiguity. Is that a design feature you have built in, to put within regulation, so that it can be changed and adjusted over time? The cost of that would be uncertainty for investors, and business made it pretty clear they're not confident because of that uncertainty.

Mr Hamilton : I'll make a couple of points on that. Firstly, I think we are providing some certainty to aspects of businesses that may be doing business with Defence, for example, or providing a service to Defence. Quite clearly they're required to notify us. We're also intending to provide guidance to foreign investors intending to invest in Australia about which businesses might be covered. That will be in the nature of guidance rather than being prescriptive. I would characterise it more as retaining the flexibility to adapt to circumstances rather than as deliberate ambiguity.

Senator O'NEILL: Right, but it is a deliberate choice to keep it outside the legislation and keep it in regulation so as to provide you with the flexibility that you believe is required.

Ms Kelley : I think it's to provide the government with the flexibility that is required. Successive governments have used this approach. In some ways, it can be a fast moving environment we're in. With the geopolitical changes that we're currently experiencing, if we had to go through a legislative amendment process every time we might need to respond to risks that are emerging, it would tie the hand of any government being able to respond appropriately to the risks that are presented to the national interest.

CHAIR: Senator O'Neill, I think that Senator McAllister had a follow-up question.

Senator McALLISTER: I do, and thanks, Senator O'Neill, for letting me follow up. I'm trying to understand the relationship between the national security businesses set out in this legislation and the proposed reforms to the security of critical infrastructure framework that has just been released by the government. Is it correct to understand that the exposure draft that's currently the subject of consultation expands the list of sectors that are considered critical infrastructure quite substantially.

Mr Hamilton : For the time being, should parliament pass the Foreign Acquisitions and Takeovers Act legislation, it will point to the extant Security of Critical Infrastructure Act, which provides clarity. Yes, the government has released an exposure draft of proposed changes which would expand what is covered by that act. Clearly, details of what's proposed should be directed to the Department of Home Affairs, but we do acknowledge that the logic behind their reforms are to ensure that we are protecting Australia's critical infrastructure. There is a logical link, therefore, to what the government is proposing in this legislation around foreign investment in such critical infrastructure. Obviously, the SOCI Act is broader than foreign investment. It looks at a range of other issues that it needs to manage in relation to risk, but, clearly, it is sensible for us to maintain that link should that list change.

Senator McALLISTER: Okay. This question is a question of fact, not policy rationale—I'm just trying to understand. If the bill we're considering this afternoon passes, then it will be a notifiable national security action if you seek to start a business or acquire a business in the sectors that are listed in the SOCI framework.

Mr Hamilton : Yes.

Senator McALLISTER: Okay. And it's also the case that, at the moment, the intention is to expand that framework to include, for example, food and groceries, telecommunications and a range of other additional sectors which are not currently included within that framework. Is that correct?

Mr Hamilton : Yes, that's our understanding.

Senator McALLISTER: Okay. Thank you. Thanks very much, Senator O'Neill. I do appreciate you letting me ask that question.

Senator O'NEILL: No, it's great to be on the team with you, Senator McAllister. One of the specific fields that were just mentioned was food and groceries, and we had witnesses today—I think it might have been the Business Council—questioning how food and groceries could become a national security matter. I know that we've just lived through 2020, with COVID et cetera. Is it that reality that's informing the expansion to include food and groceries, or is it something else?

Mr Hamilton : I think that's really a matter for Home Affairs.

Senator O'NEILL: Okay. Could you help me understand how the Treasurer will come to know about an action that poses a national security risk that needs to be called in for assessment?

Mr Hamilton : I'll talk at a high level on that. Obviously, this is all subject to the legislation passing parliament. The resources that the government has provided to Treasury that Ms Kelley spoke about in her introductory statement are in part designed to help us build a more effective capability to work with partners across government to identify where risks might emerge that weren't anticipated. There's obviously an IT component to that; that was provided in the budget. That's for new systems to help us conduct our analysis and work with partners. But there was also additional resourcing for us and a number of other agencies to build our capability and to start thinking about where risks could emerge, what information systems—databases, for example—we might need access to to start having a look at the market to see if there are trends or potential activities emerging that we might want to have a closer look at, and to then form a judgement about whether we would seek a decision from the Treasurer to exercise those new powers. So it will be about the Treasury building its capability with the resources that the government has provided, working with other national security agencies and also non-national security agencies—our partners who understand the sectors that we might be looking at.

Senator O'NEILL: Such as the ATO?

Mr Hamilton : Such as the ATO. We work very closely with the ATO. For example, if we were looking at a potential acquisition in the agriculture sector, we would obviously want to go and talk to experts who understand that sector, who understand the benefits that that investment might bring in, who understand the players—the potential target, the potential acquirer. That's a very important part of our consultation process at the moment, and then we marry that up with talking to national security agencies about what threats might arise as a result of that acquisition.

Senator O'NEILL: So you're signalling a bit of a change from what was described here this morning as ad hoc consultation. This is going to be more systematic?

Mr Hamilton : I would perhaps disagree with the characterisation that it's ad hoc. I did note that comment while I was watching with interest. I would disagree with that. I think that, over time, it's true that Treasury has evolved to be a much more effective, consultative agency. We have very clearly defined ways in which we work with other partners. We do consult very regularly with security partners, including ASIO, as Ms Kelley mentioned in her opening remarks. We work very closely with the Department of Defence on a range of issues that might affect their equities. We work very closely with colleagues in departments across government, both security and non-security, as I said, to form our judgements on individual cases—and, importantly, not just on individual cases; we work very closely with them on some of the broader policy issues as well around foreign investment and how we work to implement the government's foreign investment policy framework.

Senator O'NEILL: I'd like to ask some more mechanics questions, but I'm mindful of the time, and I've got a whole lot of questions, so, if I can, I'll just move along. How much of the detail is left to supporting regulations that haven't been finalised, and when will they be finalised?

Mr Deitz : In terms of the regulations, the main aspects of the package that need to be finalised is the definition of 'national security businesses'. We have consulted on those, and that's in the process of finalisation. The fees regulations need to be finalised—the streamlining of passive foreign government investors that I referred to earlier, the moneylending exemption, which some of your witnesses earlier this morning referred to as something on which ongoing consultation is occurring. Those would probably be the main aspects of the regulations that need finalisation at this time.

Senator O'NEILL: So, we're having a one-day—

CHAIR: Sorry, can I just jump in there, Senator O'Neill.

Senator O'NEILL: Yes.

CHAIR: This is on the same topic. Is Treasury—because I think at least some of the hesitation that we heard about this morning, some of the criticism, was about a lack of guidance that is currently available. Obviously you've got to do the consultation before you draft the guidance, but is the expectation that guidance material will be forthcoming? Obviously, it's difficult to put it out before the legislation passes, but in what time frames would you expect that to be available?

Ms Kelley : It will be available before the legislation is enacted. We're on a time frame where we will be ready and have information ready before the 1 January start date. In fact, I think we're looking at December, but it all depends on, as you know, when the legislation is passed. But, we will have that information ready, and we're just finalising the last bits of that based on the feedback that we've had from people.

Senator O'NEILL: Can I ask why that important detail in terms of regulation hasn't already been finalised and made available to us as legislators to see and to interrogate ourselves in light of concerns that have been raised by the broad community, particularly the business sector, around what's proposed in the legislation? You're proposing that the legislation goes through and then the documents will go out afterwards. It seems to me not very good practice that legislators can't see what it is that we're legislating for because regulation and advice about the regulation is not available.

Ms Kelley : Regulations have been out for consultation. It's not that people have not seen those.

Senator O'NEILL: No, but you've just indicated that those things are still under review, that they are still changing and that there are important details that are not public yet. Is that correct?

Mr Hamilton : I think Ms Kelley was referring to the guidance material which we make publicly available for investors and their advisers wishing to invest in Australia. At the moment, we have a significant number of what we call guidance notes available for investors on the website. Clearly, should parliament pass the legislation—and subject to finalisation of the regulations—we'll need to update all of those and, potentially, take the opportunity to refresh them as well. We can't—

Senator O'NEILL: But it sounds to me like you are responding to some of the concerns, for example, those raised by the Australian Financial Markets Association—Mr Deitz, you indicated just then that you're working in that space. Are you working on things that are still to be embedded in that legislation that will come before parliament in coming days, or is it done?

Mr Deitz : None of the matters that I referred to there are in the legislation. They are in regulations. As Ms Kelley and Mr Hamilton have already referred to, those regulations cannot be finalised until such time as the legislation is passed—just by a matter of formality.

Senator O'NEILL: This is the tension point between (a) the flexibility to do that and the trust for it all to be done right and (b) the scrutiny of parliament about what's being implemented and the concerns about the community who are coming to us and saying, 'We don't know what's going on, and we're really worried that there's going to be a cut-off in terms of investment in Australia.' That's the complex space that we're in.

Ms Kelley : It is. I acknowledge that. We've listened to the evidence that was provided to the committee today, and that feedback represents the feedback that we have also received over this. So there is always a mix in terms of people who are very supportive and want things to happen quickly versus people who have concerns.

But I also note that the strong and consistent message we have also received from our appearance at various committees we have appeared at this year, when we have been talking about foreign investment, is that the reforms that this legislation contains are very much ones that will address the concerns that those various committee hearings have raised. I know there's been a question about this being rushed and those sorts of concerns, but there's been work on these reforms for quite a while. There was extensive consultation and there was extensive feedback from a range of people. You've heard not only the chair of the board but also certain other members of the board talking with a range of stakeholders.

Senator O'NEILL: To be fair, we heard that there were consultation processes that a lot of people felt were one way

Ms Kelley : People are always going to say that. I've been doing consultation on government policy for many, many years, and that's always a criticism you get. People are always going to represent their views. A consultation process for us to clearly present what the policy position is but also for people to have the opportunity to present their views, and people will come from their individual, personal sector perspectives. Our job then is to synthesise that and to give advice to government, and it is for the government to make decisions that are in the national interest for all Australians.

Senator O'NEILL: Thank you for that answer. Have any concerns been raised about the government's proposal to change the definition of 'foreign government investor' to streamline or exclude investments by passive investors? You did speak briefly to that, I think, Mr Deitz.

Mr Deitz : There were no concerns about the policy. There was useful and constructive feedback around how to ensure that the policy intent was best delivered through the regulations, and we have worked through that.

Senator O'NEILL: So you have a settled position on that?

Mr Deitz : I would need to check how settled that position is, but it is something which we have received feedback on, and we have put that through the regulations.

Senator O'NEILL: So that is a definition in regulation that is close to being settled? Okay. At this point, what would you say are the biggest concerns raised by stakeholders in response to the draft bill, and how have those concerns been addressed in the draft bill?

Mr Hamilton : At a very high level I would characterise it in a similar way to Ms Kelley's characterisation: there are certain sectors of interested stakeholders who think that perhaps the powers don't go far enough. I think you potentially heard from one of those this morning.

Senator O'NEILL: ASPI.

Mr Hamilton : They were looking perhaps for extension of the powers in various directions. On the other hand you have certain sectors of business representatives talking about the powers going too far, and sometimes they're talking about precisely the same powers, some saying they are not going far enough and some that they are going too far.

Senator O'NEILL: Perhaps that reflects the general disposition. Of course we want to look after our national security—everybody says that but in a motherhoody way. 'I want it to happen but not in a way that's going to cost me anything.' That's not an unusual human response to things. Business advocates will be looking at current practice, and any change is always a cost. Ultimately, it might be better or it might not be. My impression—and I think I'm being fair here—is that case for national security risk doesn't appear to have been made out in a way that the stakeholders who've been here today have actually understood.

Mr Hamilton : My view on that would be that the government has made a pretty cogent case for better protections that are set out in the bill. They've been set out from the start of the process, when the government set out its policy intent, and we've certainly reflected those in all of our stakeholder engagements to talk about the rationale for what we're doing. It's not just national security, of course. There's the compliance component. There's the streamlining component. There are a range of aspects of who we have proposed that we've talked through. I think we have made some sensible and calibrated adjustments between the exposure draft and the bill that was introduced, and with could talk through those if you want. At the end of the day I think it's important that we don't resile from the government's determination to protect both the national interest and, particularly through this bill, enhanced powers in relation to national security. I haven't come across any stakeholder who has disagreed with that. As you say, sectors of the business community then want to move the conversation on pretty quickly to the cost and the potential impact on investment within Australia, but we've already outlined some of the quite promising indicators in relation to Australia remaining an attractive—

Senator O'NEILL: I know that from your opening statement—

CHAIR: Sorry, Senator O'Neill, I'll just ask a question here because I am interested in this. Obviously foreign investment is essential. Have you got comparable examples? You've talked about a number of other countries who are introducing more comprehensive foreign investment regimes. Have you got comparable countries where foreign investment has continued to flow post the introduction of those or is everyone only thinking about this in the current international environment?

Mr Hamilton : As Ms Kelley said, there are a range of countries that are implementing new powers. The particular focus of your question—what's been the implication of those changes post introduction?—I will need to check if I have some notes here. If not, we could maybe take that on notice—

CHAIR: I'm happy for you to take it on notice. I expect we are all heading in the same direction at roughly the same time.

Ms Kelley : I think you're right, Chair. I think it's interesting that we have discussions with our counterparts in these countries and so we're are all discussing this and in some ways learning a bit from each other as well. We can come back to you with some further detail on that because we will have to see whether we've got that information.

Mr Hamilton : It is interesting when you look at the way that countries talk about their foreign investment regimes and the reforms to them. The UK, for example, will talk about what Australia is doing. We're almost on the same path in terms of thinking about the same issues. In their public explanation of their reforms they'll refer to what Australia is doing, which is evidence of how closely engaged we are in relation to these issues.

Senator O'NEILL: Is there a high degree of activity in comparable countries because countries are coming to some understanding of the challenges that they face, given their multiple trade agreements and how that might compromise sovereignty?

Mr Hamilton : By 'activity' do you mean reforms to address risks in foreign investment? Yes, I think there is. There clearly is. Clearly a number of other countries have implemented strengthened foreign investment regimes in recent years.

Senator O'NEILL: Is that related to trade agreements in any way or is it simply your argument that it's related to the challenges of COVID?

Mr Hamilton : I wouldn't say it's related to the challenges of COVID. I would characterise it as general awareness of some of the risks that come with technological development, some of the risks that come with investment. You would expect countries to look very closely at their security arrangements to manage these sorts of issues. At the end of the day though the—

Senator O'NEILL: My question was a little more pointed than that. I understand the general context. My question is more, having signed a number of free trade agreements are countries discerning that that has in some ways limited their capacity to manage sovereign risk and, therefore, is that driving some activity of this kind? Are those two things connected in any way, in your view?

Mr Hamilton : I think that would really be a question to put to the Department of Foreign Affairs and Trade. But there are security clauses in these sorts of agreements that enable countries to protect their national security. No country would sign away its security rights.

Ms Kelley : There are standard clauses in the free trade agreements around that.

Senator O'NEILL: Have you done any work on the expected impact of this more restrictive policy on foreign investment—impact on GDP, impact on jobs?

Have you done any modelling around what you think will happen if this legislation passes in the coming days?

Ms Kelley : No, I don't think we've done that specific modelling. But I think, as I noted in my opening statement, we have certainly not seen a decrease in applications for foreign investment this year, particularly during a difficult year with coronavirus. I would note also that, really, in doing the analysis of that now, the majority of the cases we would have got anyway. There is a smaller number of $0 threshold cases than we probably anticipated at the beginning, whereas we've had an increase, as I mentioned, in the applications we would have got regardless. Of course we'll do that analysis and have a look at it, but we're certainly not seeing a downturn in applications.

Senator O'NEILL: Given the evidence you've just put it on the record there, do you think, or are you concerned, that arguments we've heard today about the legislation as it is proposed, with the regulation sitting alongside it, will create sovereign risk, that it will deter investment and that this is happening at a time of increased economic uncertainty? Do you hold a different view from evidence that we've received today to that effect?

Ms Kelley : The evidence that we're seeing and what we've seen this year in terms of applications would probably cause me to say, 'I'd like to wait and see'. But, certainly, as I said, the applications have increased—

Senator O'NEILL: So far so good. You don't think that this will have any suppressing impact but that it will increase national security?

Ms Kelley : It will increase, but we're getting some of those now anyway. We are getting every application at the moment because of the $0 threshold.

Senator O'NEILL: Yes.

Ms Kelley : Once the legislation is approved by parliament, the Treasurer certainly made it clear that we'll have a seamless transition back to the previous thresholds, with national security being maintained at the $0 threshold.

Also, all along—and we do this now—we encourage investors to actually engage with us, to talk with us around their application, the issue that they're looking at and how we can help them. We're going to put out a lot of guidance, we're going to keep talking with people, like we always do, and we're going to encourage people to come and talk with us. We're also encouraging people by saying, 'If you're not sure then pick up the phone and have a chat with us'.

Senator O'NEILL: Will you have a fix for the problems outlined by Mr Love from the Australian Financial Markets Association by the time this legislation is passed?

Ms Kelley : You'll have to refresh my memory about what the problems were that he outlined.

Senator O'NEILL: The complex nature of partnerships that occur in terms of funding, and also the reality of foreign ownership in Australian banks, would bring them into a preapproval stage before they could loan money or cover debt.

Mr Deitz : I might perhaps give a general answer and then one of our remote colleagues may like to add something about the detail. The money-lending exemption in the current regulations is a longstanding exemption. It was previously in the act before it was moved to the regulations in 2015. It has been the case that the kinds of arrangements that Mr Love referred to in the past have been screened under what was known as the foreign investment policy. There was a change made in March 2013 to no longer screen certain types of syndicated loans with respect to the participation by foreign government investors. These regulations were made in 2015 and those exemptions were retained.

The changes that the government is making at this time very much look at the possibility that because of the moneylending exemption it is possible for a lender to take possession, ultimately, of an asset—

Senator O'NEILL: Of a piece of critical infrastructure.

Mr Deitz : in a way which effectively extinguishes any conditions that might have been put on that without the government having an opportunity to review that transaction and to consider whether to prohibit or to impose conditions. The points that Mr Love was making were very much focused on one particular kind of lending arrangement: syndicated lending facilities, and the way they are structured and how likely is the transfer of possession. His view, I think, was that it was remote. There is also how we would seek to strike a balance in the regulation to amend it from what it currently is, which is that all of those arrangements would be exempt, to something which achieves the government's policy objective but perhaps picks up on his views about consequences.

Senator O'NEILL: Is that position resolved yet, or is it still under construction?

Mr Deitz : It comes back to the point that we made earlier that the finalisation of these regulations won't be made until the act is passed. It has been the subject of some detailed discussions with industry, and we hope to finalise that shortly.

Senator O'NEILL: In terms of the call-in power and the 10-year review, how does the last-resort power sit in terms of other countries?

Mr Deitz : The call-in power is increasingly available in many comparable jurisdictions. It is new for Australia. It is something which does enable the Treasurer to act, as Mr Hamilton referred to earlier, if an action may ease concerns. It allows us to bring it into the review framework, to examine it and to make a decision. Various countries have made different decisions around the time frames for that. The UK, in its legislation released last week, has suggested a five-year time frame for its call-in power. In the US it's unlimited and always has been. It is also unlimited in New Zealand, as it is in the Canadian system.

Senator O'NEILL: So your argument really is that this is comparable—is that right?

Mr Deitz : No, Senator. There are several factors which go into that. It is the advice of agencies around how the time frame should be set: how long does it take for information to surface through a system and for agencies to analyse that and provide advice such that you can exercise the call-in? It is also part—

Senator O'NEILL: Three years is not long enough and that's why you specified 10. Is that correct?

Mr Deitz : That is certainly part of it. It is also partly a feature of the way that our act operates. There are some technical provisions which can deem an acquisition to have taken place many years before in fact the title transfers, for example, for property. The way section 15 operates means that it can be, again on the advice of different agencies, perhaps anywhere up to four years before the acquisition in fact occurs. It can start to appear in ways which will allow us to identify that information and take a decision. So there are a range of factors that we've balanced in reaching that decision.

Ms Kelley : From what has just been said, it's not out of line with our key partner agencies, when you look at three of them who have not set a time limit at all.

Senator O'NEILL: Have foreign governments raised concerns with you about the changes at all? Which changes and which governments?

Mr Deitz : With Treasury?

Senator O'NEILL: Yes.

Mr Deitz : There are no direct concerns that I am aware of. I would have to take it on notice whether there were any submissions to that end.

Senator O'NEILL: In terms of interactions with foreign governments, there's been no engagement? For example, the US, or the chamber of commerce from the US, have not been in contact with you?

Mr Deitz : No.

Ms Kelley : You asked whether they had raised any concerns?

Senator O'NEILL: Yes.

Mr Hamilton : We have consulted very extensively with a number of close partners in relation to the way that we've been working on these reforms. In the conversations that I've had, they have been very supportive of what we are doing.

Senator O'NEILL: Could you provide me with a sense of what foreign governments you've been consulting with?

Mr Hamilton : I'll take that on notice. I just need to confirm what we can provide advice to the committee on.

Mr Deitz : There is also the Department of Foreign Affairs and Trade and Austrade who have been engaging in significant representations with respect to these reforms, and with foreign governments as well. There have been many engagements and a lot of clarifying questions. We have to take on notice the specifics of your question.

Senator O'NEILL: And I would be interested in any influence that has had on your decision-making or any suggestions that you have taken up from overseas. You gave a bit of an indication, I think, Ms Kelley, that you expect to have guidance materials ready in December if the legislation is passed in the coming days. Will it be in time for Christmas? When do you expect to provide that to the market? What outreach will be undertaken to explain how the regime works in practice?

Mr Hamilton : Obviously the time frames are tight.

Senator O'NEILL: They're very tight.

Mr Hamilton : They are very tight. As soon as we have legislation and regulations, we will be moving to finalise that guidance material.

Ms Kelley : We are not aiming to do a Christmas eve present drop, shall we say.

Senator O'NEILL: What additional resources does Treasury have to undertake that outreach in December to the sectors? Also, what additional resources do you have in addition to the IT money, which we have already had on record, to undertake wholesale increase in the enforcement capacity of this department?

Ms Kelley : That's where we go to what I said in my opening statement. We now have our compliance branch with 17 full-time equivalent staff. We are in a recruitment process, and by January 2021 we will have upsized to 30 full-time equivalent staff. That covers the compliance and enforcement side. We have also taken on, as I said, increased staff in our case assessment area, and we have also supplemented that with some non-ongoing staff to help us with the temporary zero-dollar threshold work as well.

Senator O'NEILL: Can you provide on notice the numbers and the levels of the people who are going to do that work?

Mr Hamilton : Senator, your question was around how many people are working on the guidance material. It is very difficult to give you a definitive answer because that guidance material depends on expertise across the division. For example, guidance material on how the new compliance regime will work will depend on people who have expertise on the legislation, compliance staff who have expertise on compliance and our case management staff who understand how the system works in terms of providing advice for the Treasurer's consideration. So it's not as though there will necessarily be one person dedicated to one task. It is about expertise resident in people across the division who will be drawn upon to provide that guidance. As Ms Kelley said, we are growing; we are at about 114 permanent staff now. A lot of those will be involved, in some way or another, in working on this guidance material.

Senator O'NEILL: And enforcement?

Mr Hamilton : Enforcement, as Ms Kelley said—

Ms Kelley : When I talk about compliance, I use that as the broader term for compliance and enforcement.

Senator O'NEILL: That's 30 people. That's the thin blue line to protect the nation?

Mr Hamilton : The whole purpose of the framework is to protect the nation.

Senator O'NEILL: It's bigger than two. I have to give you that.

Mr Hamilton : I think, to give a proper answer, the way that we work through individual applications is about protecting the national interest. We have a capability that we have grown substantially to do that over the course of this year. We will continue to maintain our capability there. Then the compliance capability to follow up on cases that are approved by government and making sure that applicants are complying with the conditions put on their approvals is another part of it. If you like, the whole system is designed to protect the national interest; not just the compliance team.

Senator O'NEILL: Thank you.

CHAIR: I had a few things, but in the interests of time I will just go to that. You mentioned conditions placed on foreign investment. Are there any changes to conditionality or to the arrangements involving conditions under this legislation in terms of the way that conditions are imposed or the type of conditions that may be available to the Foreign Investment Review Board?

Ms Kelley : No, there are no significant changes in the suite of conditions. I think what has happened is that the government has provided the additional resourcing to ensure that we can monitor and enforce those conditions, I suppose, with much greater strength. The other difference is that they have given us, with what is proposed in this legislation, the full suite of regulatory powers as well. So my example is that at the moment infringement notice schemes are only available to be used in residential real estate applications, whereas the legislation proposes that infringement notice schemes can be used across all applications in terms of what is approved. So I think what we are looking at is getting the full regulatory toolbox in terms of that, helping us to ensure compliance and encourage compliance and, where people are noncompliant, to actually deal with that effectively.

CHAIR: Is the IT upgrade that was funded in the recent budget to help triage information as high risk or low risk? What is the purpose of the IT upgrade there?

Ms Kelley : It is to replace our existing system, which is, as other committees have identified, probably not as fit for purpose as we would like. Basically, the money provided for the IT system will give us a more effective and efficient application processing capability, like a case management tool. It will also help us with compliance monitoring. There is some funding as part of that that has gone to the ATO for a new consolidated register of foreign ownership of Australian assets, which will give us a consolidated view of investments that have proceeded. It's upgrading. The third element is that it will also have an analytics component to it. It will help us with our market intelligence and some of that more proactive work we need in terms of identifying what's happening with foreign investors across the system.

CHAIR: Alright. I think we need to leave it there. That concludes today's hearing. I wish to thank all of the witnesses for their cooperation and everyone who has made a submission. I would also like to thank Broadcasting, Hansard and, of course, our wonderful secretariat. The committee stands adjourned.

Committee adjourned at 17 : 02