Queensland Nationals Senator Barnaby Joyce has called for an overhaul of foreign investment laws so private equity debt is deemed a "controlled instrument" in future transactions.

His comments follow the collapse of the Airline Partners Australia $11 billion debt-funded takeover attempt of Qantas.

"The Foreign Investment Review Board must be given the power to investigate debt levels and ascertain where real control lies in any future foreign private equity takeovers in Australia.

"The Qantas debacle has exposed flaws in Australia's foreign investment review process when it comes to foreign private equity debt. Debt instruments should be deemed controlled instruments.

"We must be able to ascertain where control really lies before approving takeovers of Australian companies. For instance, if foreign private equity has 20 per cent of a company, can it direct costings in such a way which makes this arrangement an instrument of control?

"Will Australian shareholders simply become a license to manage the overseas debt instrument?

"If private equity firms can withdraw funds or raise interest rates that could be catastrophic for a company even if, on paper, the company is majority Australian owned.

"I note with interest the apparent complete ambivalence of Kevin Rudd towards the Qantas takeover. Apparently he was prepared to stand by and watch 35,000 workers' jobs, potentially, disappear overseas."

Senator Joyce also noted that Qantas' current overseas shareholding may be in breach of the forty-nine percent foreign ownership cap.

"Qantas should come clean on this immediately," Senator Joyce said

"The effect of the current debacle on the Qantas share price will be negative in the short term but Qantas remains an extremely strong company and in the long term the APA offer will seem tawdry."