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The foreigners aren’t coming: foreign ownership of Australian farms

By David Leyonhjelm - posted Monday, 19 September 2011


The first objective data on foreign ownership of Australian farms for over 25 years was issued by the Australian Bureau of Statistics last week, and it seems foreigners haven’t been buying up the place after all.

Based on a survey of 11,000 agricultural businesses, 89 per cent of total agricultural land is entirely Australian owned while 92 per cent is majority Australian owned. Moreover, foreign ownership is only fractionally higher than the Agricultural Census of 1983-84 showed.

Most of the 8 per cent more than 50 per cent foreign owned is in the Northern Territory, with another big chunk in Western Australia. This is no surprise – foreign ownership of northern cattle stations has been common for over a century.

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Probably about the only thing that has changed, which the survey did not examine, is the nationality of the foreign owners. Whereas once they were mainly British, these days foreign owners are more diverse and include the Chinese, who are viewed with similar suspicion to what they faced 150 years ago when they came to dig for gold.

Of course there are still plenty who think even this level of foreign ownership is too high, or suspect foreigners will sneak in and buy everything if we relax our vigilance.

The Victorian Farmers Federation says tighter controls are needed. The National Farmers Federation thinks it’s really about how much production is foreign owned, not just the land.

The Senate Standing Committee on Rural Affairs and Transport is conducting an inquiry into whether the Foreign Investment Review Board national interest test should be altered in relation to agricultural land and what impact this will have on food security.

In the NSW parliament even the Shooters and Fishers Party has weighed in on the subject, asking, “Does anyone really think that the food grown in Australia by foreign interests will be used to feed Australians?”

Wariness of foreigners in agriculture is nothing new, in Australia or elsewhere. However, it has intensified in recent years due to countries like China, Egypt, Japan, South Korea, Saudi Arabia, India, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates seeking to ensure their future food security by buying or leasing fertile land in other countries.

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Since 1971 Brazil has had a law controlling foreign acquisitions of farms, depending on the region, of greater than 240 to 5,000 hectares. These restrictions were not enforced between 1998 and 2010, leading to considerable international investment (although nobody knows exactly how much). Concerns about Chinese state-owned firms and Middle East sovereign wealth funds led to the law being enforced, although an increase in the threshold is now under consideration.

In Argentina the government is proposing a law that will restrict foreigners from buying land larger than 1,000 hectares. About 7 per cent of Argentina’s farmland is said to be foreign owned at present. Uruguay is considering a law similar to Argentina, and its foreign ownership level is thought to be at least 20 per cent. Ironically, most of the foreign owners there are Brazilian or Argentinian.

Some have gone further. In Paraguay land ownership is restricted to nationals, although for years there have been ways of circumventing this. Several Canadian provinces prohibit foreigners from owning non-metropolitan land totalling more than 20 acres.

Australia is comparable to the US in having no significant barriers to foreign ownership of agricultural land. Only about 1 per cent of U.S. farmland is foreign owned, much of it used for forestry and owned by Canadians.

There is, of course, no objective way to decide how much foreign ownership is too much. The Irish might suggest that close to 100 per cent in the context of a semi-feudal absentee landlord system is too much, but that is no help. If foreigners owned 100 per cent of Australia’s agricultural land, yet the government retained all its current powers over taxation, exports and transfer pricing, why would it necessarily cause any harm at all?

In fact, the history of foreign investment in agriculture is strongly positive, just as it is in developing minerals. Investors invariably have a long term perspective, seek a positive return on their capital and invest additional funds to increase output and productivity. Importantly, they employ locals, buy inputs, adopt modern technology and pay taxes. For people wishing to sell their farm, being able to sell to a buyer offering the highest price has multiple benefits.

And the idea that Australians might run short of food because it is grown on foreign-owned land is too silly to take seriously. Australia is a huge food exporter and always will be, no matter who owns the land on which it is produced. 

One of the outcomes of foreign agricultural investment in countries such as Russia, Ukraine, Nigeria and Senegal has been a substantial increase in output. Although the land is productive, it has been held back by a lack of capital, technology and infrastructure. Often there are no facilities for storing grain or fertiliser, roads or rail on which produce can be transported, or ports from which it can be shipped. Either through direct investment or by attracting the support of others, foreign investors have worked to overcome these barriers. 

The same applies to Brazil in the vast areas where forest has been cleared to create farmland. However, the new controls there are said to have put a stop to investments of $15 billion. Clearly the pace of expansion will now be much slower.

That has relevance to Australia. Most of our rural roads and bridges are in need of significant upgrade. Our rail networks cannot cope and struggle to remain viable. A bumper wheat crop can cause infrastructure indigestion lasting many months. If foreign investment led to improvements in these, it could hardly be criticised.

Australians have tended to regard themselves as a little superior to Latin America, with its history of dictators, coups and political instability, despite having a shared interest in agricultural and mineral exports. It would be ironic if Australia followed it down the path of limiting foreign investors in its farmland. Especially when the foreigners are not even buying any more of it.

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About the Author

David Leyonhjelm is a former Senator for the Liberal Democrats.

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