Political Insights Series: Interview with Simon Birmingham, Minister for Trade and Investment

by Steve Lewis

“It was the best of times, it was the worst of times….”

Simon Birmingham, Australia’s roving Minister for Trade and Investment, could be forgiven for citing Dickens’ epic Tale of Two Cities when reflecting on the current global trading environment. While the Minister can justifiably gloat over recent bilateral trade deals – with Indonesia, Hong Kong and Peru – that will come into effect in 2020, he concedes the ongoing stoush between China and the United States is having a dampening effect on global economic conditions.

In a wide-ranging interview for the Australian Investment Council, Senator Birmingham talks up the potential for private capital to tap into recent trade gains, including the recently signed RCEP (Regional Comprehensive Economic Partnership).

But he also concedes that Australia, along with many other countries, is paying a high price for the disruption caused by Sino/American trade tensions, along with the Brexit saga. All of which makes his role, of managing the Trade portfolio and selling Australia to the world, one of the most challenging and demanding in the Morrison Government.

Global trade tension has impacted Australia

“Global trade headwinds, in terms of disputes between US and China, disruption of World Trade Organisation processes, events like Brexit, even events like the dispute between Japan and Korea, have all had a negative impact on growth in the global trade flows,” the Minister says.

“And that has flowed through to hit global economic growth and certainly Australia has felt that; not so much in terms of our own trade flows, which remain at record, or near record, levels in terms of the value of Australian trade... but certainly it has had a dampening economic effect here, and more profoundly in other countries who are facing negative economic growth.”

While calling for a “degree of stability” to return to the global trading environment, the Minister is unsure whether the superpowers’ stoush will get worse before it improves. “Only those two countries can sort that out between them,” he concedes.

While admitting that Australia has little leverage when it comes to soothing trade tensions between Beijing and Washington, he says it has actually had the perverse effect of bringing Australia and other trading nations closer together, in defence of the World Trade Organisation and a free market rules-based trading system.

“There is a recognition when we sit down with our regional partners in RCEP, that takes in 15 or 16 regional countries, or when you sit down with the European Union, that as well as the tangible benefits of pursuing trade agreements between each other, there is a real symbolic benefit in demonstrating that we are getting on with the path of opening up our trade flows and demonstrating the role it has played in wealth generation over recent years,” he says.

On a recent visit to China, accompanied by 200 Australian companies, Senator Birmingham was forced to confront the inconvenient truth: that the deteriorating political relationship between our two nations is raising question marks over future trading conditions. China, of course, is Australia’s largest trading partner, and the Minister must deftly manage the fallout from the increasingly strident criticism of China and its alleged interference in Australia’s political system by senior political, media and intelligence figures.

Asked directly whether he worries this bellicose denunciation of the Communist superpower will harm two-way trade, the Minister replies: “There shouldn’t be negative effects in that we both – Australia and China – recognise that we have different systems. In Australia, matters will be spoken of freely as is true to the values of our country, but that shouldn’t impede us from getting on with the positive aspects of the relationship, of which trade is one of them.”

Indeed, while Australia’s economy is limping along, with annual growth of 1.7 per cent, we are experiencing record levels of exports to China. And the Minister confidently predicts Australia will continue to “grow that market” notwithstanding the obvious signs of geo-political tensions.

Private capital is important for bilateral trade flows

Likewise, Senator Birmingham is bullish about the potential for private capital to play an increased role in helping Australia’s economy grow, fuelled by the recent trade deals that he hopes will open up offshore investment opportunities.

“Australia has something like the 6th largest funds under management plan in the world. That is a huge resource for our country,” he says.

“It is also increasingly a maturing sector looking for the opportunities beyond our shores, and that is something that in building the success of Australian companies, as well as the returns on their investment and savings, it is important that we do encourage those funds under management and capital to look at the opportunities, not just in Australia but overseas and to broaden their spectrum.”

The Minister is keen to ensure that private capital investment “sits high up the ladder” when it comes to opening up bilateral trade flows in Indonesia and India and other priority markets.

FinTech and RegTech important for new Australian industries

He is cautious though when asked about further reforms to stimulate private capital investment in Australia. For instance, while Britain has recently introduced measures to unlock 20 billion pounds in ‘patient’ capital, the Minister is unwilling to discuss specific measures.

Instead, he says the Government will continue to “analyse and tweak where required some of the reforms that are delivering benefits around venture capital investment and the like, in terms of encouraging that investment in highly innovative parts of the economy”.

Pressed on this point, he describes the reform process as a “never finished project… in terms of looking at mechanisms to make sure that we are getting policy settings right to attract the optimum level of investment in venture capital and like projects”.

He adds: “From Australia’s perspective, we have seen gains there. We want to see more. The Government is particularly eager in areas of FinTech and RegTech to encourage further business development and opportunities there that can create new industries in Australia.”

And he sees strong opportunities for Australian firms to tap into regional markets such as Singapore to capitalise on growing demand for innovative digital products and services.

“Our region is one of the most dynamic in the world and still offers really strong growth prospects,” the Minister says. “What we are desperate to see is that over coming years, the business literacy of Australian investors and companies in doing business across the region lifts so that the opportunities to really secure two-way investment flow, business growth and trade growth, with those relationships, is realised.”

Scope to enhance Strategic Investor and Talent Visas

He is also open to further changes to the strategic visa program to encourage foreign investment to Australia. This includes the global talent scheme which aims to attract highly skilled individuals to our shores.

Likewise, the Minister flags potential changes to the Significant Investor Visa (SIV) program which offers a four-year pathway to permanent residency for entrepreneurial and high net worth individuals. The SIV requires the individual to make a $5 million investment, a proportion of which has to go into venture capital.

The majority of participants so far have come from China and the Minister says

“We want to make sure that is the right mix, in terms of the quantum, in terms of the split, to attract the type of investors and entrepreneurs who want to come to Australia but also to guarantee that in return for that access to Australia, we are getting the type of investment that can help Australia best”.

While the high proportion of Chinese investors has fuelled some questions in Canberra, the Minister plays down the need for radical change.

“I understand that there are some changes in the application flows already that are expanding the base. But these are people who are making business investments, who are seeking to gain residency rights in Australia,” he says.

“The commitment that we are looking for in return is that those investments create jobs and opportunities for other Australians and, of course, these investments are therefore governed by Australian rules and expected to operate to Australian standards and values.”

Steve Lewis is a senior adviser with Newgate Australia. He worked for more than two decades for Australia’s leading newspapers and was a leading figure in the Canberra Press Gallery.