Foreign Ownership

In recent years there has been increasing public comment and concern about the extent of foreign investment in Australia.  This is not a uniquely rural issue with concerns about domestic real estate, corporate infrastructure and essential assets competing for public attention alongside of the agricultural lands.

Australia is a relatively young country and it is fair to say that much of agriculture and mining has been heavily reliant on the inflow of foreign capital to achieve the levels of development we see today.  Equally it is clear that there remains significant development potential and it is likely that more foreign capital will be required.

The challenge that is associated with this complex debate comes with determining tenure arrangements that provide a suitable and stable investment environment to encourage foreign capital while still providing opportunities for genuine wealth capture for Australia and its citizens today and into the future.  These two objectives do not need to be mutually exclusive.

It is important to differentiate the source of capital that underpins foreign investment in Australia and also the nature of the participation and integration of that investment into the Australian economy.  Sovereign investment funds present a different set of objectives and necessary considerations as opposed to commercial institutional investors and private investors.

An essential consideration for any Government in relation to foreign investment and foreign ownership must lie in the implications to competitive market forces.   Typically, foreign capital tends to be “patient”.  This term refers to the requirement for immediate returns on the capital invested and infers that there is a long term rationale for the investment and is therefore not subject to mortgage default risk.  This is important to consider, because it differentiates foreign capital in the market.

Increasing the amount of patient capital flowing into Australian markets creates an increased and distorted level of competition for smaller Australian investors who are exposed to mortgage default risk and require higher returns and lower risk profiles or a lower entry cost to be able to enter the market.  In effect unfettered foreign capital flowing into Australian markets unfairly displaces Australian investors and effectively precludes future generations of Australians from participating in long term opportunities for wealth creation.

If we consider this is in the context of agricultural land, the impacts are profound.  In effect agricultural land is a perpetual asset of the nation with an immeasurable earning capacity over time.  Typically the value assigned to agricultural land is not considered in these extended timeframes and assigning a short term value to agricultural land belies its true value. It is incumbent upon us to hold this type of asset in trust for future generations or at very least ensure they can benefit from these types of assets.

It would seem that in this instance foreign investment in agricultural land should be limited to a finite timeframe most obviously in terms of a limited tenure as opposed to freehold title. 

Similarly, foreign investors should be compelled to declare their production and earning in Australia and participate in the Australian economy in the same way as any other Australian investor would.  In this way, income and profit would not be as easily exported.   This would also mean that the company is compelled to operate on an even basis with Australian business in regards to the labour market, environmental stewardship any other compliances.

It is important that there is a comprehensive understanding of the nature and scope of foreign investment and ownership in Australia.  This is not through xenophobia, but a need to be accountable to future generations in the far reaching consequences of today’s decisions.

In this context CountryMinded pursue policies that:

  • Limit tenure for foreign investment in Australia
  • Provide accurate reporting of all foreign investment in Australia
  • Effectively regulate operating compliance of foreign investment entities

Showing 1 reaction

Please check your e-mail for a link to activate your account.
  • commented 2016-06-19 17:49:14 +1000
    The following relates to the above statement: “Similarly, foreign investors should be compelled to declare their production and earning in Australia and participate in the Australian economy in the same way as any other Australian investor would.”

    I think its important to differentiate between foreign investment per se and foreign ownership by foreign state owned (or partly owned) corporations. Lots of implications with the latter in terms of potentially jettisoning our market based systems and regulations over to the political will and influence of foreign governments. Maybe OK if they are playing the market game within our regulatory and economic environment. But foreign investors in some cases may almost certainly have long term food security strategies uppermost in their minds. They tend to think much longer term than we do. So lets keep in mind the impact of State Owned corporation’s gaining control of Australian supply chains. Its not just an issue of who owns the land.

    Nick Edols