You call that a register?

SOME kind of consensus seems to be emerging that a reasonable compromise between those who have no objections to foreign investment in agriculture and those who oppose it, in whole or part, is to create a register of foreign ownership.

Such “transparency”, it is suggested, will allay fears and allow everyone to argue from an informed position rather than relying on limited ABS data, Queensland’s existing register or, as is often the case, assertions based on no facts at all.

The government, with the support of the National Farmers Federation (NFF), has agreed to establish a national register of foreign farm purchases. The Opposition is not opposed to the idea.

The assumption that accurate information about foreign land ownership will lead to a more rational and measured debate is curious. I am struggling to think of any other situation where consideration of an emotional issue has been improved by objective data.

It is easy to envisage the register being used to reinforce existing points of view. If the level of foreign ownership were to increase from 8 per cent to 10pc, for example, a politician somewhere will inevitably convince a journalist to generate a story with the headline “Foreign ownership increases 25pc”.

Those who have no concerns about foreign investment would undoubtedly point to both figures and say, “See, nothing to worry about”.

In fact, simply recording how much land is owned by foreigners will contribute nothing meaningful to the debate. Even knowing whether the amount is increasing or decreasing will make nobody better equipped to debate whether there is a problem, or even what the problem might be. For the register to be genuinely useful it needs to record a lot more information.

To begin with, it should show the number of employees working on each foreign-owned farm. Clearly we do not want anyone employing illegal immigrants on slave wages, which would be illegal in any case. But the more employees there are, the better for the Australian economy. It might also be advisable for the register to record the wages paid to employees. Domestic farmers would not want foreign-owned farms driving up the cost of labour.

A useful register would record how much the farm spends on inputs such as chemicals, fertilisers and machinery, and whether these are purchased from local suppliers or imported direct from overseas sources. Ideally, foreign-owned farms would buy their inputs locally even though some Australian-owned farms directly import their own fertiliser and machinery.

It would also record whether the farm sold its produce or livestock to local buyers at prevailing market prices or shipped them off to a parent or affiliate buyer overseas, at a different price. Selling overseas at a low price in order to reduce local profit (and thus avoid tax) is known as transfer pricing. The Tax Office is well aware of the potential for this and is all over any business it suspects of doing it.

Selling it for above market price would increase local profits and lead to the payment of more taxes.

The register should record whether the farm generated a profit on which it paid tax, and any dividends paid to foreign shareholders. This would allow a comparison between domestic and foreign owners and their contribution to tax revenue.

On that front the foreign owners would not need to be particularly profitable to have an edge. The old joke about the Australian farmer winning Lotto only to “keep farming until it’s all gone” is based on a core truth. Most farmers are not very profitable and pay little or no tax. Indeed, Cubbie Station went broke while it was owned by Australians.

Not that foreign shareholders should expect to do a lot better. The Japanese company Kirin, for example, has not done its shareholders any favours by acquiring the dairy processor National Foods. In fact the history of foreign agricultural investors in Australia is one of lower profitability than shrewd locals. It’s just that not all locals are shrewd.

One way or another the register should also try to record whether the foreign farm is likely to send all the food it produces back to its owner’s country and leave Australia without enough for itself. I’m not sure how that could be confirmed – perhaps by owning its own trucks and ships along with a private army and black helicopters. I suspect others will have a better idea about that than me.

An obvious requirement of the register would be to identify the nationality of the foreign purchaser. Despite their annoying tendency to talk about rugby, it would not be fair to treat Kiwis the same as other foreigners. In fact, they should probably be exempted from the register entirely.

The truth is, there are degrees of foreignness. Brits and Americans have owned plenty of land in the past without causing much concern. The Japanese raised some hackles back in the nineties when they began buying property, although in the end most of them lost money.

It is really the Chinese, who we’ve had dubious feelings about ever since they came to Australia to dig for gold in the 1860s, and the Arabs, to whom we assigned the term ‘wog’ in WW1, that provoke concern.

Thus knowing the nationality of the foreign land owners will give us information about what we are really worried about.

And finally, we should record whether the foreign investors are owned by ordinary hard-working people, such as a Canadian or Swedish pension funds, or by a government that locks up political dissidents or treats women as second class citizens. That would at least give us information about issues that matter.

David Leyonhjelm is an agribusiness consultant with Baron Strategic Services. He may be contacted at reclaimfreedom@gmail.com

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READER COMMENTS

Terje Petersen
22/10/2012 7:35:09 AM

Yeah that is sounding a bit complicated. Let's call the whole thing off.
Nev
22/10/2012 10:36:04 AM

This sounds a bit like watching the old hay shed fall down. She be right it's only leaning by 15 deg's, we'll measure it again next year, cool, only leaning by 35 deg's, we'll measure her again next year.. ..holy smoke pop she's flat on the ground, cripes we don't have the money to replace it, what are we going to do now.
ME Again
23/10/2012 6:36:26 AM

The only reason for a "register" to to exert control and influence. It has no positive uses which will actually add one dollar to national wealth, and even more importantly it will add not one jot of wealth to the average farmer. Worse, by turning away foreign investment, which is what you do when you impose pointless hurdles, you will irrevocably harm the financial standing (like equity levels) of tens of thousands of average farmers - the life blood of Australian agriculture.
Dickytiger
23/10/2012 6:57:42 AM

But Nev, the Leaning Tower of Pisa has been leaning for a thousand years.
farmer barb
23/10/2012 7:50:24 AM

I realise we must have foreign investment, but if we allow countries that now buy agricultural products from us to buy up large tractss of land such as Cubbie Station, will that country still buy the type of products grown on it from us?I was in the Cashmere industry and I know what that particular country did to our Australian industry. Most overseas countries including China do not allow foreingners to own land in their countries. Personally I believe that we should only allow leasing of land by foreign countries and not outright ownership. I don't believe we should be 'selling off the farm'
ME Again
23/10/2012 8:40:35 AM

Farmer Barb, your motives are pure but the realities are not. How would a long term lease change the "who gets the products issue"? What security would that give for the people working on that farm and downstream? How would it support land prices, given that many farmers accept a less than economic return from leasing their land (<4%) just which then pressures values down?
farmer barb
23/10/2012 12:12:32 PM

Hi Me Again, Yes I understand that, but my argument is: The foreign company owns the land, then produces products on that land, that are now produced by Australians. These are then exported to their country of origen, cutting out our producers. The profits made by the company are banked in their country. The only thing Austr. benefits from will be the taxes collected from them. This happened in Cairns, Nth Qld with the Japanese tourist industry. The duty free shops were owned by Japanese companies and staffed by them. All goods, tours and so on, were paid in Japan before they came to Cairns.
farmer barb
24/10/2012 7:04:04 PM

To add to my comment about the Japanese tourist industry in Cairns. The goods sold in the shops to Japanese tourists were pre-paid in Japan as was all accommodation, tours and so on to Japanese owned companies. The japanese duty free shops were staffed by Japanese on temporary visas whos salaries were paid back in Japan. the only money earned by Australia was for the shop leases. Even the street signs in the city were written in Japanese. Looking at current trends, unfortunately I can see the same thing happening in the agricultural industry.
Agribuzz with David LeyonhjelmCommentary, news and analysis with agribusiness consultant David Leyonhjelm. Email David at reclaimfreedom@gmail.com

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