Public policy on foreign investment in Australian agriculture needs improving

Published 20140210

The Australian agricultural sector has a long history of foreign investment, with overseas capital playing a critical role in the development of industries such as wool, wine, cotton, beef, feed grains and sugar. Foreign investment will also undoubtedly play an important role in the success of Australia’s agricultural sector into the future. Key advantages of foreign investment in Australian agriculture includes greater availability of investment capital, enhanced international market access for export commodities and flow-on effects such as the introduction of skilled labour, advanced technology and productive industry competition (see here).

For the Australian agricultural sector to take full advantage of the benefits of foreign investment, it is critically important that weaknesses in public policy are addressed. Weaknesses in public policy surrounding foreign investment in Australian agriculture have exacerbated public concerns about issues such as the market power of industry monopolies, lack of market transparency, the potential for tax avoidance, and the potential for foreign government investors to flaunt Australian laws. The outcome of public concern has included rejections of foreign investment proposals for parts of the agricultural sector that are in dire need of investment capital. Archer Daniels Midland’s failed bid for Graincorp is a prime example (see here).

Policy improvements could help to reassure farmers and the wider public about the benefits associated with foreign investment and the role that foreign investment will play in the future success of the Australian agricultural sector.

An important public policy area to improve is transparent asset ownership. Australia has no reliable data available about the extent of foreign ownership of farm land, irrigation water and agriculture supply chain infrastructure, which is in stark contrast to almost all developed nations. For example, both the United States and New Zealand require foreign owners of as little as five acres of land to notify the government of the purchase or sale of that land within a few months (see here and here). The introduction of monitoring measures to address the limited availability of transparent information about the extent of foreign investment in Australian agriculture would ensure that the approval process for any new investment is based on relevant and factual industry information.  

The role of foreign investment in Australian agriculture and some policy weaknesses that need improving have been discussed more broadly in the recently published Farm Institutes Insights February newsletter (see here).

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