Australia's laws against foreign interference have created an atmosphere of suspicion and failed to target serious threats to the nation, a China-focused think tank says.
A new paper from the China Matters policy institute has called for the laws to be tightened and targeted more at the most damaging attempts at interference instead of scrutinising links with foreigners.
Asia Institute research associate Melissa Conley Tyler and University of Melbourne researcher Julian Dusting said the laws were too broad, poorly focused and had clear negative impacts.
The wide scope of the legislation had made Chinese-Australians feel "guilty until proven innocent" over their links to people overseas, had stigmatised international connections, and harmed Australia's relationship with China.
Ms Conley Tyler said the laws were not focused on the serious threats facing Australia.
"What it's ended up doing is creating this atmosphere of suspicion in which any international engagement, any working with foreigners is now seen as suspect," she said.
And the paper said: "Blanket suspicion of international engagement is contrary to Australia's interests".
It criticised three pieces of legislation introduced since 2018 and attempting to strengthen national security with measures seen as aimed mainly at China as ASIO warned of an unprecedented espionage threat.
Among them are laws for a public register of activities undertaken in Australia on behalf of a foreign principal.
Other legislation under fire in the paper is the foreign relations laws introduced late last year and seen as targeting Victoria's memorandum of understanding with China over the nation's Belt and Road Initiative.
The paper said the measures regulated "the existence of connections" and created a category of activities deemed to be suspect enough to require scrutiny, and to potentially be cancelled by the federal government.
Money spent on policing the legislation's wide scope and scrutinising foreign arrangements could have been better used to concentrate on serious threats and resource the Department of Foreign Affairs and Trade.
The China Matters paper urged reform narrowing foreign interference laws, which are due for review in December. The legislation should be better targeted at the most damaging efforts at interference, the paper said.
Ms Conley Tyler said security agencies preferred the broadest possible legislation capturing potential acts of interference and espionage.
"At the political level, we have to then say, what are the unintended consequences? Having really wide laws actually affects the health of our overall democracy and society," she said.
"We need to keep these narrow."
The paper also said the government should better distinguish between foreign influence - a practice openly followed by all governments - and foreign inteference. It should also establish protections against foreign interference and espionage with a strong federal anti-corruption agency and more funding for the Australian National Audit Office, the paper said.
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