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Thursday, 22 September 2011
Page: 6886

Senator XENOPHON (South Australia) (15:50): I introduced the Foreign Acquisitions Amendment (Agricultural land) Bill 2010 with my colleague Senator Milne, from the Australian Greens. I am very grateful for the work she has done with me on this bill. I am also grateful for the comments from my colleagues on both sides of the political fence, from both the government and the opposition, some of whom believe that we need significant reform in this area. I am hoping that that undercurrent for reform will eventually be reflected by legislative change in this field.

Australian farmers produce everything from wheat to wool, from bananas to beef, from pineapples to poultry and from milk to maize. Agriculture and closely related sectors earn $155 billion a year, which represents a 12 per cent share of the nation's GDP. According to the Australian Bureau of Statistics, the total area of agricultural land in Australia, as at 31 December last year, was 398 million hectares. But until the introduction of this bill, it was impossible to tell how much of Australia's agricultural land was owned by foreign entities. We now know that 11 per cent of Australia's agricultural land, some 45 million hectares, has some level of foreign ownership, with some 0.3 million hectares having an unknown ownership status. We also know that the state with the greatest proportion of land of foreign ownership is the Northern Territory, followed by South Australia. But I still cannot tell you what areas of land are owned by foreign entities or what sector they are relevant to. It is also not clear the extent to which either state owned enterprises or entities that have close links to state owned enterprises have ownership of our prime agricultural assets. There are a number of reasons why we simply do not know. Firstly, that data is not kept. Apparently it is not a function of the Foreign Investment Review Board to maintain this sort of information. How the Foreign Investment Review Board is supposed to assess investment proposals without this information I am not quite sure. And how the government is supposed to be able to identify policy reform needs without this insight is beyond me. Secondly, investments by foreign entities less than $231 million in value do not require an application to the Foreign Investment Review Board. That means that a business from, for example, the United Kingdom, China, India or Europe could buy a farm to the value of $230,999,000 and not be subject to review by the FIRB. If it is the United States it is over $1 billion by virtue of the free trade agreement.

But $231 million can buy a lot of prime agricultural land. It is an extremely high threshold and what it means is that many foreign investments are made without the government ever being made aware of such an investment. We may well be selling off prime agricultural land with no way of knowing to whom and what the long-term national interest implications are of that. Indeed, a foreign business could buy a number of farms up to $231 million in a piecemeal fashion and the government would never know.

According to the media reports, the buy-up of Australian agricultural assets has become more aggressive since the global food shortage of 2008. In December last year Hong Kong based company Nexus bought a 4,060-acre property in rural Queensland for $25 million. Nexus also bought a 500-hectare property on the Sunshine Coast for $20 million last year. There have also been reports of Chinese companies with a question mark as to the extent of their involvement in or links with state owned enterprises in China acquiring dairy assets in Tasmania. A recent report named China, South Korea, Japan, India, Saudi Arabia and the Gulf States as the buyers who have become most aggressive in their purchases. This is not a criticism of those countries at all. In fact, I think those countries are showing long-term vision for their own national interests in terms of security of global food supply. These countries are looking to protect their own food security and they cannot be faulted for that. But we have to acknowledge that our poor foreign investment requirements put our own agricultural industry at risk, particularly in the longer term.

I should stress that foreign investment is by and large unambiguously a good thing for a small, open economy like Australia. It can provide a significant boost to our economy. But there must always be a focus on Australia's own agricultural security and long-term food security. For this there needs to be a way to monitor what foreign investments are being made to this unique and very important sector. This bill provides for that. It does not stop foreign investment in Australian agricultural land. All it does is lower the threshold from $231 million to enable greater awareness about who is buying what so that appropriate policy decisions can be made. That is a very important point that I must stress. This bill does not stop foreign investments in Australian agricultural land. What the bill does is ensure that foreign investments are properly assessed, information gathering is increased and transparency is improved, and that there must be a national interest test.

This bill, which I introduced with my colleague Senator Milne from the Australian Greens, is extensively based on the Overseas Investment Act of 2005 from New Zealand. For a number of years there has been an Overseas Investment Office in New Zealand to oversee foreign investments. It is similar to the Foreign Investment Review Board here in Australia but, dare I admit it, Mr Deputy President, especially during rugby World Cup time, I think we have a lot to learn from our neighbours across the Tasman. It pains me to say that. Under the New Zealand regime a foreign investor requires approval from the government for an investment in rural land if it exceeds five hectares. New Zealand recognises that rural land is special and therefore any applications by foreign entities to purchase it need to be subject to serious consideration. There are even tighter restrictions if the land is near a conservation reserve or adjoins a foreshore. This bill mirrors the legislation which operates well and effectively in New Zealand.

The evidence heard by the Economics Legislation Committee on this bill was quite instructive. The evidence from New Zealand's Overseas Investment Office indicates that they have national interest test criteria. That is something that this bill mirrors. In contrast, Australia's national interest tests are guidelines only. I think there is an issue there about the vagueness and the lack of transparency in the way the Foreign Investment Review Board currently does its work. That is not a criticism of the Foreign Investment Review Board per se but a criticism of the framework upon which it operates. Ms Toni Moyes, an analyst at the New Zealand Treasury, said during the inquiry hearing that the legislation is based on the guiding philosophy that foreign investment is welcome in New Zealand but it is also a privilege. Ms Moyes told the committee:

New Zealand has a long history of regulating investment in farmland, which reflects the traditional view in New Zealand that land ownership should not be concentrated in the hands of a few but should be able to be widely dispersed amongst the population.

The New Zealand model is robust, it is transparent and it is effective. Furthermore, the Overseas Investment Office provides extensive detail about all applications received, whether approved or not. Contrast that with what happens here with the Foreign Investment Review Board. That is why I welcome the inquiry by the Rural Affairs and Transport References Committee into the Foreign Investment Review Board. This bill does not seek to deter foreign investment; rather it simply aims to enable greater scrutiny against the benchmark of the national interest. We have a working model across the Tasman where it is effective. It should also be noted that the 200 applications a year in New Zealand are dealt with effectively and efficiently. They are dealt with in a way that is fair and on the rare occasions that there has been a judicial review of those applications the evidence given by the Overseas Investment Office is that those cases were largely dismissed; in other words, the Overseas Investment Office's decisions were upheld.

As a result of the Senate committee inquiry it was noted that, given the difference in land size between Australian and New Zealand, five hectares is not an appropriate threshold. So an amendment to this bill has been circulated in consultation with my colleague Senator Milne. It will amend the bill so that the threshold is lowered from $231 million to $5 million. This is a monetary threshold rather than a spatial one. When the first Foreign Takeovers Act was introduced in 1975, the rural land threshold for scrutiny was $1 million

I believe a lower threshold is important if Australia is to be truly able to make informed policy decisions about our agricultural future, and $5 million is an appropriate threshold. It is roughly in line with the original $1 million threshold, taking into account CPI increases and the like.

Farmland is not our only concern. International investors are becoming increasingly interested in the Australian water market. A recent ABS survey found that nine per cent of the water entitlements for agricultural purposes in Australia are owned by foreign businesses. But there is an issue about the nature of the survey. Whilst I welcome the survey and whilst it is an improvement on the level of information we have, I think there are some flaws in the survey. I emphasise that that is not a criticism of the Australian Bureau of Statistics. They were constrained by the instructions given to them by government. For instance, the survey may tell us what percentage of land is owned by foreign interests or in which land foreign interests have a share. For instance, the study found that 24 per cent of the Northern Territory's agricultural land is either partly or wholly foreign owned. But it does not tell us what the value of that land is in terms of its agricultural output.

That defect is even more pronounced with water entitlements. There is a global figure that nine per cent of water entitlements have a foreign investment component, but we do not know what those water entitlements are. Are they, for instance, general-security water? If you look at the Murray-Darling Basin there is a huge difference between high-security water and general-security water. Owning one per cent of Australia's high-security water is much more significant than owning five or 10 per cent of general-security water or low-security water. There is a very big difference in that. These are issues that are of real concern.

The ownership of water has real potential to distort our water market. Water entitlements are not something to be played with. In Western Australia—and I note that Senator Bishop has an interest in this matter—31 per cent of water entitlements for agricultural purposes are partly or wholly foreign owned, which is the highest for any state in the Commonwealth. This is a very serious issue for farmers, who are only now coming out of the worst drought this country has ever seen.

This legislation will prevent us from selling off our backyard before we realise what we have done and it is too late. This bill will also put into legislation a national interest test based on the New Zealand model. The government currently uses guidelines around national security, competition and other government policies, the impact on the economy and the community, and character of the investor. But the test needs to go further. This bill sets out detailed criteria by which the Treasurer needs to consider applications for foreign investment. Applying these to potential investments in Australia will enable greater scrutiny to be applied. There are specific matters to consider such as whether the foreign investment will have an impact on competition, global security and market outcomes; whether it is likely to result in the creation of new job opportunities; whether Australia's economic interests are adequately safeguarded and promoted, including looking at issues of aggregation and vertical integration; and whether the acquisition will result in increased processing in Australia of Australia's primary products.

The fact is that we do not know enough about the current level of foreign investment in Australia, particularly in agricultural land, and we do not have a mechanism to monitor it. This bill will require the online publication of applications for interests in Australian agricultural land and for the status of these to be updated as the applications proceed. If the Kiwis can do it, why can't we? This process will give us the informa­tion we need about the current state of play so that we can be informed to make good policy decisions for the future.

Again, this bill is not about saying no to foreign investment. This bill is about improving transparency and increasing the information we have access to about who owns our backyard. It is about strengthening the process and allowing more scrutiny, rather than letting things go too far, when it is too late to do anything about it. This legislative framework works well in New Zealand and will significantly benefit this government's information about who owns what, where and why so that we can have a sensible, informed policy debate about this.

Wouldn't it be useful to know at the click of a button whether or not a particular company has already bought two dairy farms in one town and is planning to buy another two dairy farms, considering the impact that could have on the local market? Wouldn't it be good to enable the government to indentify that this behaviour might be having a serious impact on local Australian dairy producers? Quite simply, without this bill we will never have all the information we need to make informed policy decisions when it comes to Australia's agricultural sector.

This legislation is important. It is important to overhaul the current rules. It is important to lower the current absurd threshold of $231 million before the Foreign Investment Review Board can even begin to look at an investment. It is important to acknowledge that the recent ABS survey, whilst useful, begs more questions than it answers. That is why it is important and in the national interest, in the interests of our long-term food security, in the interests of our farmers and in the interests of preventing market distortions that this bill I introduced with my colleague Senator Milne be passed and supported by the Senate.