The Australian government would join a controversial Chinese-led infrastructure bank if Beijing can meet global governance standards, Prime Minister Tony Abbott says, despite reports that cabinet's National Security Committee had found against it on strategic grounds.
Mr Abbott – who was responding to reports cabinet had split on the issue, with Treasurer Joe Hockey in favour of joining the bank and Foreign Minister Julie Bishop opposed – said on Friday that he would like China's new regional investment bank to "go ahead" and it was "absolutely appropriate" that China should seek to lead the institution.
"We would like to join but it has got to be a multilateral institution with the kind of transparency and governance arrangements that, for argument's sake, the World Bank has," Mr Abbott said on Friday.
"Should we get that sort of transparency and governance arrangements not only will Australia be happy to join but I imagine Korea, Japan and the United States would be happy to join."
Government sources say the National Security Committee decided early last week to continue negotiating before signing up to China's proposed Asia Infrastructure Investment Bank (AIIB), which poses a seminal test of Australia's ability to preserve economic and security interests underwritten respectively by China and the United States.
The Committee wants to ensure World Bank-standard provisions that would ensure Australian taxpayer funds could not be used to facilitate corruption or to advance narrow Chinese strategic objectives, such as the construction of dual-usage ports in the South Pacific.
Since the committee meeting, fresh reports have been circulated to key ministers showing the potential risks, with Sri Lanka's naval chief forced to reassure India that a new Chinese-funded port was "purely commercial" despite the surprise docking of a Chinese submarine last week.
But contrary to reports, officials say that intense top-level American and Japanese pressure to scuttle the deal has not figured heavily in Australian decision-making
"If the decision was driven by American political pressure we would have said 'no, never," said a well-placed Australian government source.
"The door's not shut, it's a two-stage process, the first stage involves the memorandum of understanding and the second stage is to negotiate the articles of association, when more details would emerge," he said
On Friday morning Opposition Leader Bill Shorten jumped on reports that the National Security Committee found against the bank recently, saying Australia "needs to be open to the proposition of involvement" in the institution.
He accused the government of being in "disarray" over reports that Mr Hockey and Ms Bishop had disagreed about whether to join the bank.
"Now, it is fair to say that the governance arrangements need to be examined, that all of the matters which go towards the processes do need to be examined, but I think it is wrong just to slam the door on terms of this proposition [because of the] infighting of the Abbott government," Mr Shorten said.
As late as Wednesday this week, Mr Hockey was asked if Australia was any closer to making a decision to sign up to China's investment bank.
"Well that's something that's consumed a hell of a lot of my time over the last few weeks," Mr Hockey said.
"The challenge with AIIB, which we have communicated directly to Chinese government as well as to other interested parties, is that there is a considerable amount of work that needs to be done to ensure that it is truly a multilateral organisation.
He did not say if Australia had given the Chinese government a deadline for those answers.
Sources say Australia is walking "in lock-step" with South Korea, which faces a similar collision of economic and security interests underwritten by China and the US respectively.
South Korea's deputy Minister of Trade, Kwon Pung Oh, told Fairfax that he could not comment on the proposed Chinese-led bank, given political sensitivities.
"Politics and economics are not completely separate," he said. "So it's a little bit delicate."
Other Korean sources said Korea and Australia were consulting "intensively" on the matter and had agreed to pursue parallel negotiations with Beijing to seek better standards.
They say China has provided conflicting signals and has failed to produce any detail in writing about what it wants.
"Chinese colleagues have told us they will follow the best practice of existing entities [like the World Bank] but they think that existing entity policies are too bureaucratic and inefficient," he said. "They think there should be some modifications."
