The Turnbull Government’s decision to block the sale of S Kidman and Co’s business interests to foreign investors has been welcomed by some and rejected by others. The most disappointed will be the vendors.
The Government is at pains to take every opportunity to say it welcomes foreign investment. Yet its behaviour belies its rhetoric. Since its election in 2013, every action it has taken has been designed to frustrate foreign investment: new screening thresholds; higher application fees; different thresholds for Asian investors; and of course, the Kidman and ADM decisions.
Barnaby Joyce recently claimed it’s nonsense that Australia needs foreign investment. Even by Barnaby’s standards this is a foolish statement. The National Farmers Federation has estimated that for Australian agriculture to meet rising overseas demand it will require investment of between $1.2 to $1.5 trillion over the next 35 years.
If we are to make the most of the opportunities presented by growing demand for our clean, green and safe product in Asia, we will need more capital. As an island continent with a small population and limited savings capacity, much of that money will need to come from foreign sources.
For every buyer there must be a seller and it’s the sellers who win when foreign buyers push up the price of farm land. No sector is suffering higher debt to assets ratios than agriculture.
The Government’s legislation will require Foreign Investment Review Board (FIRB) screening of investments in agricultural land worth more than $15 million.
Further, the $15 million threshold will apply cumulatively, meaning it will include the value of an investor’s existing farm holdings as well as the proposed new investment.
The West Australian-based cattle and grain producer Wellard – which has built a major Australian export business over the last 35 years – points out that this means it will have to lodge a FIRB application every time it buys a $10,000 paddock next to one of its existing properties.
Labor voted for a sensible $50 million, non-cumulative threshold – the same threshold that Mark Vaile and John Howard supported – but the Government relied on the Greens and independent Senators to ram its position through the Senate.
The legislation also imposes a $55 million threshold on investments in agribusiness – and defines agri-business so broadly that the new rules will affect half of Australia’s food manufacturing industry.
Labor voted against these barriers because they will deter the investment we need to build a more efficient, productive and competitive food processing sector.
The new investment screening thresholds have been criticised by the Business Council of Australia, Australian Food and Grocery Council, Cattle Council of Australia, Queensland Farmers’ Federation, West Australian Chamber of Commerce and Industry, Australian Lot Feeders Association, Australian Financial Markets Association, Wellard, Graincorp and Ridley Corporation.
Labor supports an open, outward-looking, non-discriminatory foreign investment regime for Australia’s agriculture sector.
By contrast, Malcolm Turnbull, Barnaby Joyce and the Greens have imposed a discriminatory regime which will increase costs and make it harder for farmers and agribusinesses to raise capital.
The “dining boom” is starting to look more like “dining gloom”.
This article was first published in FARMONLINEon Thursday, 3 December 2015.