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 firstname.lastname@example.org