Canberra gets veto in Australian states' foreign deals

The Australian federal government will have the final say in any agreement between the country's state and territory governments and foreign governments.

This includes the pact between Australia's Victoria state government and China for Beijing's Belt and Road Initiative (BRI).

The Australian conservative coalition government did not mention China by name in the legislation but the enhanced powers given to Canberra will provide prime minister Scott Morrison with another issue on when to unwind Victoria's BRI deal with Beijing that was signed in 2018.

A move to block the deal with Victoria will upset Beijing, while doing nothing with its new found power will be seen as kowtowing to China in a period when the two countries have endured escalating trade and political tensions.

"Well we never agreed with it in the first place and still don't agree with it, and no doubt decisions on that will be made in due course," Australian treasurer Josh Frydenberg said outside parliament house in Canberra in response to a question about Victoria's BRI agreement.

China has imposed various trade sanctions on an expanding group of Australian exports, including barley, beef, coal, copper, lobster, certain wood products and wine since Canberra earlier this year called for an independent inquiry into the origins of the Covid-19 virus, which followed after Australia banned Chinese telecommunications company Huawei in the construction of 5G telecommunications networks. Australia last month said it was considering taking China to the World Trade Organization over import tariffs on barley.

Despite rising tension, Australian exports to China rose to a four-month high in October. LNG exports from the port of Gladstone, Queensland in eastern Australia to China increased to a record volume last month.

The two countries have also joined the world's largest free trade group, the Regional Economic Comprehensive Partnership.

The foreign investment reform (Protecting Australia's national security) bill 2020 was passed on Tuesday in the Australian senate, where the ruling Liberal-National party coalition government does not have a majority. It passed the lower house of parliament, the house of representatives, on Monday.

By Kevin Morrison