Published in The Weekend Australian on 7.12.13
FIVE minutes into the contest for the Coalition government's economic philosophy and it's already Nationalists 1, Rationalists 0. A government that declared Australia was open for business following the biggest investment boom in a half century has sent a shocking signal to global investors by blocking the acquisition of GrainCorp by US firm Archer Daniels Midland.
The decision to block was bad enough, but the reasons given were even more worrying. Having been cleared by the Australian Competition & Consumer Commission, the proposal was rejected by Joe Hockey ostensibly over competition concerns. The ACCC, it seems, didn't know what it was talking about.
The real reason for blocking the acquisition overturns decades of Foreign Investment Review Board practice. For the first time, the Treasurer has inserted the level of stakeholder and community concern as a component of the national interest test for proposed foreign investments. By introducing this criterion, Hockey has issued an open invitation to economic nationalists to campaign publicly against foreign investment proposals.
Former treasurer Peter Costello has warned that this new test will be a rod that can break a back. But whose back? That of the government or of foreign investors?
Expect to see more statements like those of Deputy Prime Minister Warren Truss that proposals such as the Archer Daniels Midland acquisition would make Australian farmers "servants to foreign masters".
And expect to hear more from the likes of Nationals deputy leader Barnaby Joyce, who has already urged opponents of Indonesian investment in northern Australian cattle raising to "make a big noise". After all, making a big noise is now formally a consideration in the national interest test.
Hockey reassured the public he wouldn't be bullied into blocking the GrainCorp acquisition, so the decision to block was all his own work. That's especially problematic, since most pundits would have put Hockey on the rationalists' team.
In the wake of his decision, GrainCorp, which has suffered a 25 per cent loss in value, has confirmed it will begin closing grain collection sites before the next harvest. How opponents of the acquisition consider this to be in the national interest is a mystery.
The Prime Minister's staunch defence of Hockey's decision simply confirms what had already been feared: Tony Abbott wasn't kidding when he said he worshipped the water the Democratic Labor Party's intellectual leader, Bob Santamaria, walked on.
The early signs are that the Abbott government is more DLP and less Liberal. It is already declaring one regional country Australia's best friend over others. It has strained relations with China and Indonesia through the insensitive handling of admittedly difficult issues. And it has expunged all references to the white paper on Australia in the Asian Century without seeking to replace it with an alternative.
Australia needs foreign investment in tourism and agribusiness if it is to make the transition from the end of the mining boom without recession. The latest national accounts already confirm a slowing economy.
Consider a prospective Chinese investor weighing up which country should be the recipient of its investible surpluses.
Looking at Australia, the investor faces the risk of an embarrassing political and community campaign against its proposed venture, which would be taken into account by the Treasurer in deciding whether to accept or reject the proposal. As China diversifies its economy away from minerals-intensive development, it has far more diverse investment options and will want to feel its investments are welcome.
Champions of Fortress Australia haven't worked out that Australia doesn't have an economic growth model that relies overwhelmingly on domestic savings. In a vast continent occupied by an ageing population of 23 million, Australia simply lacks the domestic savings to meet its future economic and social needs.
Although the early result in the contest for the government's economic philosophy has gone decisively to the nationalists, there's still plenty of time for the rationalists to make a comeback.
The likes of Trade and Investment Minister Andrew Robb, Finance Minister Mathias Cormann, Assistant Treasurer Arthur Sinodinos and Attorney-General George Brandis need to stand up to the nationalists. Julie Bishop should redeem herself and rejoin the rationalists after siding with the nationalists earlier this year in opposing the final stages of the previous Labor government's wheat marketing deregulation.
Consistently strong statements of support for foreign investment would be helpful and timely. Abbott's statement that the government supports foreign investment where it is in the national interest rings hollow when the national interest now takes account of community campaigns against foreign investment. No time should be lost if the government is to reassure foreign investors it is middle of the road, not a 21st-century reincarnation of the Democratic Labor Party.