Selling vast tracts of Australia's farmland to foreigners is not in our national interest

Both sides of politics publicly support the paradigm that foreign investment in Australian farmland is beneficial, and should remain largely unregulated. Senator Chris Black (Liberal, WA) in November 2015 summarised this view, stating that foreign investment provides additional capital and access to new technologies, as well as growing local agribusiness skills. "The level of foreign investment in agricultural land is pitifully small and in my opinion, it can be greater.... Chinese investment is about 0.5 of ONE per cent of foreign investment in agricultural land".

This view greatly exaggerates the extent to which foreign land-buyers actually introduce new technology and skills. Proponents also have their heads in the sand, pretending that recent farmland sales, mostly to Asian buyers (especially Chinese), are not really significant. The Appendix (listing recent prominent sales to foreigners) dispels this myth.

Official Government data for June 2014 indicates that 12 per cent of Australia's agricultural land (about 50 million hectares, an increase of 4.7 million hectares since 2010) featured some level of foreign ownership. It is obvious (given recent and continuing buying) that by mid 2016 the percentage of Australian farmland subject to foreign ownership could easily reach 15 per cent. In the absence of policy changes or a major financial crisis in China, Australia could even reach 20 per cent foreign ownership within a decade, with China looking likely to take-on the mantel of biggest foreign owner of our farmland.

Most Australians don't have an issue with foreign land ownership at a low level (say 5 per cent). People do get concerned when it is a lot more, especially when most countries (including the countries doing the buying) don't allow foreigners buy their land.

A feature of Australia is that we have just about the cheapest farmland in the world, even when the lower average productivity of our land is taken into account. The low price reflects Australia's low population density and historic barriers to our agricultural exports. Other contributors included Britain's entry to the EU in the mid-1970s, the collapse of wool prices in the 1990s, and disruptions to our live cattle trade with Indonesia earlier this decade.

Our Top End land market deserves special mention.

It wasn't that long ago that our northern stations were seen as good for nothing, except producing skinny Shorthorn cattle suitable only for making tinned bully beef or manufacturing meat. The introduction of tropical breeds like the Brahman and the advent of live exports were game-changers. The result was a boom in top end land values that peaked around 2007-8, but even at the end of that boom, northern land was still extraordinarily cheap. Land valuers estimate that at that time the cost per (450kg Adult Equivalent) beast area in the Territory was only $1100-$2300 (varying with land type and location), whereas in southern states it was more like $4000-$5000.

The big constraint on our northern beef industry (aside from distance and inability to move stock during the wet) is dependence one main export destination - Indonesia. The industry took a knock around 2008 from the global financial crisis. Confidence was recovering until it was smashed in 2011, when the Australian Government banned live exports to Indonesia. While the ban was eventually lifted, exports were subsequently hit by reduced import quotas imposed by Indonesia in retaliation. One producer estimated that this disruption cost producers about $300 for each beast that was unable to gain access to live export.

Many people who purchased during the peak of 2006-07 were forced into receivership and property prices plummeted. In 2012 around the bottom of the market it was said that "you can pick up a (northern) cattle station for literally nothing more than the cattle grazing on it". The veracity of this comment is clearly evident (for example) from the sale price of Riveren and Inverway stations, sold in 2013for a price reported to be about $30 million, including 40,000 head of cattle (to Indonesia'sSantori Group). This equated to a modest $750 a head for the livestock, with the land and improvements thrown in for nothing! The extent of the bargain can be gauged from the fact that the market price for a 330 kg young steer is now about $1300. The Australian and (to a lesser extent) Indonesian Governments were the culprits yet the Australian Government paid out only a pittance in compensation to those affected.

Recovery in cattle prices due to a resurgent trade with Indonesia and expanded markets in Vietnam and the Philippines (as well as emerging Chinese interest) led to a renewal of confidence. It is expected that northern land values could be back to 2007 levels by the end of 2016. Cattle prices in northern Australia reached around 340c/kg live weight (about 650 cents carcase weight) in late 2015, compared with 165c/kg live weight during the worst of the live export crisis.

In terms of benefits, some foreign investors do have the capacity to introduce new technology or skills. Only a minority of foreign buyers (mainly North American and European), however, have contributed much in this area. China has an appalling food safety record in its dairy industry and until recently more than 80 percent of China's dairy farms raised fewer than five cows. China (in common with other Asian buyers of beef country) has almost no experience in running beef-cattle under our conditions. Instead, Australia leads the world in the management of extensive grazing, especially in semi-arid areas, and is highly regarded for most aspects of its agriculture. This is why (in most cases) Asian buyers of Australian farmland continue to use local management.

The main benefit to Australia of selling farmland to foreigners is the contribution of capital on the part of buyers. In respect of purchases of Northern cattle country, the evidence suggests that Asian interest lies mainly in opportunity-buying the land and continuing live export, but in a more vertically integrated format. In other sectors there are clear signs that many Chinese buyers also have an interest in processing, particularly for dairy and (southern) beef.