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

By David Leyonhjelm - posted Monday, 19 September 2011


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.

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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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