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Rural and Regional Affairs and Transport References Committee
09/05/2012
Foreign Investment Review Board national interest test

CRIBB, Mr Julian Hillary James, Private capacity

Committee met at 17:02

CHAIR ( Senator Heffernan ): I declare open this public hearing of the Senate Rural and Regional Affairs and Transport References Committee. The committee is hearing evidence in the inquiry examining the Foreign Investment Review Board national interest test. I welcome you all here today. This is a public hearing, and a Hansard transcript of the proceedings is being made. Before the committee starts taking evidence, I remind all witnesses that, in giving evidence to the committee, they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The committee prefers all evidence be given in public, but, under the Senate's resolutions, witnesses have the right to request to be heard in private session. It is important that witnesses give the committee notice if they intend to give evidence in camera. If a witness objects to answering a question, the witness should state the ground upon which the objection is taken, and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may of course be made at any other time. Finally, on behalf of the committee, I would like to thank all of those who have sent representatives here today for their cooperation in this inquiry. I welcome a very patient Mr Julian Cribb. Do you have any comment to make on the capacity in which you appear?

Mr Cribb : I am a science writer. I live in Canberra.

CHAIR: Been at it a long time too.

Mr Cribb : I have.

CHAIR: Used to write in the Land, didn't you?

Mr Cribb : Not the Land. I ran a bureau out of the Old Parliament House for Stock & Land, Western Farmer, papers like that.

CHAIR: Yes. I remember all that. Would you like to make a brief opening statement and then we will go to questions?

Mr Cribb : Certainly. In previous evidence I have outlined the risks to global food security, which are driven by the intersection of 10 major factors: the scarcities of farmland, water, oil, fertilisers, technology, finance, fish and stable climates, combined with continuing growth in the human population and its demand for food. In this evidence, I would like to comment on what I perceive as the major factors driving what is known as the global land grab, the increased trend towards foreign and speculative investment in agriculture both in Australia and worldwide. Globally, the area of farmland per person has shrunk from eight hectares in 1900 to under two hectares today and will decline to about one and a half hectares by the mid-century. The FAO's land statistics show that the total area of farm and grazing land worldwide has in face contracted in eight out of the last 10 years. The world is effectively losing an area equivalent to one Australian wheat belt per year, to multiple causes. These include land degradation, urban expansion, mining and energy expansion, recreation and sea level rise.

Marler and Wallin, and Sundquist, estimate the world is losing between 70 and 100 billion tonnes of topsoil every year. If this continues, they say the world will exhaust its soil resources in 50 to 70 years. Sundquist estimates the world has already abandoned 4.3 million square kilometres of degraded land in the last 40 years. That is an area a bit larger than half of Australia. The FAO's latest state of land and water report estimates that 18 per cent of the planet's land surface is bare and unusable, 25 per cent is highly degraded, eight per cent is moderately degraded, 36 per cent is stable or degrading slightly and 10 per cent is improving. The report concluded:

… land and water systems now face the risk of progressive breakdown of their productive capacity under a combination of excessive demographic pressure and unsustainable agricultural practices.

The area occupied by the world's cities will equal the size of China—that is nine million square kilometres—by the 2050s. That is all good land that will probably never be farmed again. The urban recreational catchment will take a similar area out of agriculture.

Global fresh water, which is closely linked to land and its tenure in most countries, is facing immense stress, with a likely doubling in demand from cities, the energy sector and industry by the 2050s, while food production too faces steep increases in demand for irrigation water. I think the FAO says that the world currently produces about 45 per cent of its food from irrigation, but by 2050 it has to produce two-thirds of its food from irrigation, because there is just not enough rain-fed land left. As major groundwater and surface resources deplete in China, the Indo-Gangetic region, North Africa, the Middle East, South-East Asia and North America, acute global water scarcities are likely to emerge by the 2030s. Generally speaking, agriculture is poorly placed to compete for its share of the water against the demands of giant industries and cities.

These factors have combined to raise global awareness of farmland and water as major opportunities for both investment and speculation. Rural land values in many countries are said to be rising faster than urban values now, as city investors seek safe havens for investment capital amid generally dull world markets. This is prompting worldwide interest in the buy-up of farmland wherever it is cheaply available, where local property rights are insecure and where national sovereignty is weak. There is a deep division between those who see this trend as benign investment by well-intentioned corporations and countries and those who see it as motivated by greed and national food security fears and as liable to dispossess hundreds of millions of local farmers and their families in both developed and developing nations. Probably it is both.

The Land Matrix portal documents over 1,000 major land deals since the year 2000, covering an area half the size of Europe. Nearly half this land is in Africa, but the trend affects all continents, including Australia. The main investors are companies from China, the Arab oil states, the USA, the wealthier Asian countries and Europe. On these data, Australian companies account for only one per cent of global land purchases and we appear to be a slow follower of the trend. A significant part of the global investment, especially by China, appears to be targeted at biofuels production rather than food. It may thus contribute to food insecurity. In my mind there is little doubt that the perceived growing overseas interest in investing in Australian farmland and agriculture or food-related enterprises is part of this worldwide phenomenon and is driven by concerns about food security and fuel security and by capital in search of safe havens. It is also part of a global trend towards the corporatisation of the food chain and the removal of family farmers and smallholders, which could potentially displace one in five of the world's population by the second part of this century.

The current trend in foreign investment appears to me to be unlikely to have serious repercussions for Australian national food security overall in the short to medium term, but it could do so in the longer term if it is not monitored closely. More immediate is the concern that corporatisation and globalisation of the food chain will result in the shrinking and closure of many small Australian farming, fishing, horticultural and related industries as a result of the sourcing of cheaper products from developing countries by major supermarkets and food processors. This will make Australia's food supply increasingly import-dependent and hence increase our exposure to global shocks.

CHAIR: There is a division, so we will suspend for a minute or two.

Proceedings suspended from 17 : 11 to 17 : 20

CHAIR: We have lost a bit of time, so would the committee be agreeable to finishing at 8 pm instead of 7.30 pm?

Senator STERLE: I cannot. I have an outside function I have to attend that I am precommitted to.

CHAIR: Anyhow, we had better kick off. We can bring the department back, I suppose.

Mr Cribb : I have spoken about the drivers of the global land grab. In my final comment I wish to address the committee's transport function. At present Australia imports around 75 per cent of its transport fuels and 60 per cent of its seafood. There are is potential to produce the whole of Australia's liquid fuel requirements from an algae farm no larger than a single big pastoral sheep station—about 600,000 hectares. There is potential to produce all of our seafood needs, plus over a million tonnes of exportable product, from new developments in aquaculture in the north and in the EEZ. These developments can occur without significantly affecting our current agricultural or wilderness areas. As the next oil crisis represents probably the greatest avoidable danger to the Australian economy in the foreseeable future, it would be sensible for this country to become self-sufficient in both fuel and seafood and to find ways to ensure that as much as possible of the investment is these highly promising new industries is Australian rather than offshore. By 2060 we could have new water-based cropping and livestock industries worth more than $30 billion spread around the continent. That is the end of my statement.

CHAIR: Thank you very much. You might just explain to the committee, if you would, the amount of money that we spend, and the amount of money that you suggest we should spend, on agricultural research to enable some of these things to occur—globally, I mean.

Mr Cribb : Worldwide, the world is spending about $50 billion a year on agricultural and food research combined. That is about the same in real terms as it was spending when there were 3½ billion human beings on the planet, so we have effectively halved our intellectual effort. We currently spend $1,600 billion a year on weapons, so we are outspending our food research50-fold in terms of weaponry. We spend 50 times more on killing one another than we do on feeding one another; let us put it that way.

CHAIR: I have to confess that I do run those figures around and you are the author of them. It is nice to have it coming out of the mouth of the author.

Senator NASH: I'll say!

CHAIR: This mob are sick of hearing about it.

Senator STERLE: It is only now that you have owned up.

CHAIR: We were briefed by the CSIRO some little while ago—I cannot remember; a couple of years perhaps—about the global protein task and the role that fish, by 2050 and then into 2070, will play in providing for the global protein task. They also articulated—if some of the vagary in the science is correct—that there will be big opportunities in the south-west of Western Australia and different places in the sea. I am not so sure if you are the author of this bit I use, but the mass of the sea is something like 14 times the mass of the land above sea level and we have not really ventured into the sea as an agricultural farm yet. Would you like to talk about the global protein task while we are at it?

Mr Cribb : Yes. World protein demand for meat and fish in 2050 is forecast by FAO to be about 550 million tonnes. That is about 200 million tonnes more than it is today. Obviously we are going to be looking at doubling the amount of meat we produce, but we cannot double the amount of fish that we produce because we have already hit peak fish worldwide. The world fish catch is 80 million tonnes and it has been falling since 2004. We are not going to get any more fish out of the sea unless we go for aquaculture. There is a huge potential to grow at least another 100 million tonnes of fish worldwide from aquaculture. However, to do that you have to feed the fish. You are not going to be able to feed those fish off grain farms because you will cause too much soil degradation—and grain will be too pricey anyway—

Senator STERLE: You say you believe we have peaked with our natural fish supply and we are now on a downward trend. What research or what proof do you have to make that statement?

Mr Cribb : I am quoting the United Nations Food and Agricultural Organisation SOFIA, State of the World's Fisheries and Aquaculture, report, the latest one for 2010.

Senator STERLE: It is very interesting because it is a topic of hot debate around this place at the moment and we are bombarded with experts—and I do not mean that rudely. That is the first time I have heard those figures or heard that statement. I am not trying to set you up for a fall.

Mr Cribb : Growth in aquaculture has offset the decline in wild fish harvests, but there is nevertheless a perceptible downtrend in wild fish harvests. That is also affected by heavily unsustainable fishing by Asian fishing companies in many of the world's seas.

Senator STERLE: There are a number of us in this building from either side of the political sphere that believe that sustainable fisheries are the way to go—and you did say wild fish in certain Asian countries. What about the Australian fishery? Do you have any knowledge or figures on how we are going there?

Mr Cribb : Only that we are eating fewer and fewer Australian fish and we are importing more and more fish from Asia—

Senator STERLE: We are aware of that. I am trying not to take up much time. I am very interested, but the belief around certain experts in this industry is, 'We are sailing great. There are no worries. Fantastic. It is a sustainable fishery and the proof is there in the pudding.' Would you contest that statement by Australian experts for the Australian fishery?

Mr Cribb : In view of what happened to the West Australian crayfish industry, which was held up as our most sustainable fishing industry, you cannot ever be sure that a fishery is sustainable, because something can happen in the environment that just blows your calculations out completely. That industry, which was regarded as totally sustainable, had a sudden collapse a couple of years ago. So we need to be conservative when setting sustainable limits on fisheries, but I believe that Australia is among the world's frontrunners in establishing sustainability principles in its fisheries.

Senator COLBECK: Seventy per cent of the seafood we eat is imported—that is what the numbers are, and I agree with you that there is enormous potential in this country for the development of aquaculture. But I am interested in what you say about peak; I am not going to argue with you particularly about South-east Asia because I know that there are certainly some issues around that. For example, they are actually increasing quotas in the cod fishery in the northern hemisphere because there was significant overfishing in those fisheries and they did substantially collapse. But because there have been strong conservation measures put in and a lot of effort put in to the science, those fish stocks are starting to recover. You might be right in terms of the global balance, but there is capacity to increase some of those fisheries management stocks in the northern hemisphere with proper management; the science is improving on that all around. I am certainly interested in some of your thoughts in respect to aquaculture. I think that the figures for Australia are that we will need another 850,000 tonnes of seafood by 2020. We are not talking out to 2050; we are talking by 2020. There are a number of untouched wild fisheries that have significant capacity at the moment, but we are certainly going to have to increase our efforts in respect of seafood, so I would be interested in aquaculture and I would certainly be interested in what you have got in respect of that.

Mr Cribb : The aquaculture potential of Australia is unlimited simply because we have got sunlight. Sunlight produces the water plants, the algae, that you can feed to fish. Aquaculture is constrained by what you feed fish: you have to have a very large supply of soya beans, wheat or corn or something to grow fish. You cannot just expand aquaculture willy-nilly.

Senator COLBECK: You need a protein source.

Mr Cribb : You need an aquatic source of feed for fish. These two things go hand in glove, aquatic livestock industries and aquatic cropping industries. So we had to develop the aquatic cropping industries at the same time as we develop the fish farms so that there is a sustainable source of food. You can grow algae anywhere. You can grow it in the water pumped out of the big mines in the Pilbara. You can grow it in salt lakes in Australia which are not being used for any other purpose. You can grow algae floating in large tanks in the ocean, in the Great Australian Bight or in the tropics. We grow algae very successfully in the Darling River without intending to! We grow them in most of the estuaries around our big cities—

Senator COLBECK: Using the outflows from coal-fired power stations.

Mr Cribb : And the logical thing is to take all the food that we are now wasting in our cities—a third of the Australian food supply—all of those nutrients, and all the sewage that we waste, and put that back into food production via algae farms. You use algae farms to produce stockfeed for the animals and the fish that you then feed to your population. So we need to recapture the nutrients from the cities, because they are going to the bottom of the Pacific Ocean at the moment—a great waste of our nutrients. And we are going to be up against nutrient scarcities by the midcentury.

So all of these things need to fit together. There needs to be a carefully thought-out strategy for doing this where we retrieve and recycle the water and the nutrients from the cities, put those into algae farms, put the product of the algae farms into seafood production—farmed fish—into stockfeed production, into plastics production and particularly into biodiesel production.

Senator STERLE: Mr Cribb, with your experience, we know that that does not happen in a lot of Australian states. We know the Tasmanians are leading the charge. We know the South Australians are very proactive and that the Queenslanders are now starting to grab it. Unfortunately, in my and Senator Back's state—and this is no disrespect to either political party—they just do not get it, and there is not the political will from either political party in Western Australia—

CHAIR: Do you mean the fish farming?

Senator STERLE: Yes, and aquaculture. So I want to ask what the downside is. There is obviously a downside. Can you tell us the defence? You are obviously a renowned expert on this stuff. Can you tell us what the downside is? We hear all sorts of stuff. The environmental movement does not want it because it might knock off the local sardines or some damned thing—I am not sure.

Mr Cribb : There is always an argument over the environmental impact of any major food production development. So that is one obvious obstacle. The advantage of aquaculture is that it can take place in the open ocean and need not impinge upon sensitive wetlands or urban estuaries or anything like that. So we have an awful lot of spare space, both on land and in the sea. The CSIRO identified 1.5 million hectares of northern Australia that is capable of being farmed for fish production, and you can grow 10 tonnes of barramundi or prawns per hectare up there now. So, potentially—

Senator STERLE: But we are not.

Mr Cribb : Well, whether people will object on environmental grounds has to be gone through. My inclination at this stage is to argue the case for oil production—biodiesel production—from algae farming as the way in here. Everybody understands you need to invest in oil. People do not understand about investing in fish farming. It sounds iffy. It sounds risky. But they do understand that oil is a commodity in demand everywhere. We are capable of having a domestic Shell company, effectively, producing fuel from thousands of algae farms all around Australia.

Barack Obama is presently spending half a billion US dollars on biodiesel from algae research, in order to keep the US Air Force in the air and the US Navy at sea. Boeing is investing it. Richard Branson at Virgin is investing in it. All the big players in the transport industry worldwide are now taking very seriously this possibility. If we want this industry to remain in Australian hands we need to start investing in it early on. I think that that is probably going to be an argument that most state legislatures can understand—oil production rather than necessarily fish. And one will lead to the other, because once you start farming algae you will farm fish with them, too, to consume your by-products.

CHAIR: I am going to go to Senator Nash, but first will just put in a plug for this. It is not a fantasy. The MBD Energy company is actually well underway with this; they have got coal-fired power stations, but they are also negotiating with—I cannot talk about who, because it is commercial-in-confidence. But there is interest and it is alive and well.

Senator NASH: Thanks, Mr Cribb. In the Australian last year, I think it was in July, you were quoted as suggesting that China was buying up resources, including food, and that this might imperil our food security. Do you want to expand on that a bit for the committee, as to what you meant by that and why and how it might happen?

Mr Cribb : If the Chinese companies that do the buying up are owned by the Chinese government, you have got the basis for a land-title dispute somewhere down the track—for example, if they happened to buy up a large chunk of, say, the Northern Territory and say: 'We own it. This is Chinese land.' So there is an issue there over sovereignty which needs to be gone into. It is no different to the issue over the Rhineland or the Danzig corridor before World War II. If there is a dispute between two governments over who owns a bit of territory it can get nasty. China is not the only one. Malaysia, Singapore and all of these places have large state owned corporations that are capable of investing in either food or fuel production in Australia. So this issue is much bigger than that.

As I indicated earlier in my evidence, this is a worldwide trend. China is buying up farms throughout South-East Asia. We are not a particular focus of their interest at the moment, although they have been buying a few sugar mills. I ask: why are they buying sugar mills? They have not said why, but the Chinese priority is to secure fuel resources. So I think they will be using that sugar for fuel production because that is their absolute priority even ahead of food at this stage. You may find that parts of Australia become farmed for fuel instead of growing food. That might have an effect on our food security down the track, especially if it becomes general. As I say, world wide speculators are moving into this area. It is not just China, I stress. It is big American companies. One of the biggest investors in Africa is Harvard University. People are looking for places to hide their money at the moment and agriculture is starting to look quite attractive.

Senator NASH: One of the issues that I have around the whole issue of foreign investment is the idea of the national interest. I think it is far more important than what level it is. It is actually about determining the national interest. In your submission at point 21 you said the current trend in foreign investment appears unlikely to have serious repercussions for the short to medium term—I think we agree there—but that it could do so in the longer term if not monitored closely. Monitoring is fine, but there has to be a point at which you decide you are going to intervene, otherwise why monitor anything? In your view, what is the intervention? I suppose that is tied in with the national interest. And what is the point of intervention? You talk about monitoring. At what point is monitoring not enough and you intervene, and is it the national interest that kicks in then? If so, what is your definition of 'the national interest'?

Mr Cribb : That is a lot of questions!

CHAIR: My view—and I have been banging on about this for a good while—is that we do not know what is happening now with investment. We have no idea in reality. What we really have to do is find out what is happening now. You know where we are going to be by 2050 and 2070 with the global food task and the shortages and the dilemma China faces et cetera. So we have to find out what we are doing now, model where that is going to take us if we continue to do what we are doing now in 40 or 50 years, decide whether that is where we want to go and whether it is in the national interest. Until you do all of that against the backdrop of—

Senator NASH: I know what you think; I want to know what Mr Cribb thinks.

Mr Cribb : Let me just say that I have no objection whatsoever to foreign investment in Australia. Foreigners have been investing successfully in our agricultural systems since Colonel Macarthur and it has driven a lot of agricultural development in Australia. But as we move into this era of greatly increased food and resource insecurity we need to keep a close watch particularly on resources like water and land. We need to know who owns them and for what purpose. If there are very large entities coming in from outside, particularly if those entities are government owned or government controlled in some way, that should sound warning bells because a government owned corporation is a very different thing from a privately owned corporation. You can kick a privately owned corporation out. Can you kick a government out? I am not sure.

Senator NASH: Absolutely. I think that is something that the committee is well aware of and certainly has a considered view about. My point, though, is about the next step. You say that should perhaps trigger warning bells at some point. What I am trying to drill down into is: what is the point at which the warning bells become actioned? We can observe and monitor, but hypothetically you can monitor until 100 per cent of Australian land is bought up by sovereign entities. That is just a hypothetical. The question we are struggling and grappling with is: what is the appropriate point of foreign investment? How much is too much? What is acceptable? This is what we are grappling with—what is the point at which we stop monitoring? And do we need some sort of policy process in place before we even start monitoring so we know when it has hit the point where it is no longer in the national interest? These are the difficulties we are facing. We understand about the sovereignty, we know we need to monitor it and we know we need to keep an eye on it. But for what end point? This is the bit we are struggling with.

Senator STERLE: You are on Hansard here, Mr Cribb. This will be interesting.

Mr Cribb : I can only say that if it began to imperil national food security in any way, then that ought to be a warning signal as well and that ought to trigger some kind of legislative or regulatory action. Certainly we would need to know if foreign governments are investing here. Personally—speaking as an Australian—I think we should not allow foreign governments to invest here. It is our country, not theirs. They should be stopped at the border in the same way—or we should make them become Australians, like Rupert Murdoch was obliged to become an American. But it is very hard to say when foreign corporations have taken too much water. For example, there is all the coal seam gas and mining water at the moment. Does that constitute foreign investment depriving us of valuable water resources for agricultural development? The answer is that it does, in the long run. But I would be one who would be seeking—

Senator STERLE: That is very touchy. That was another inquiry.

Senator NASH: I am conscious of time and if you would not mind, Mr Cribb, I might just put a few questions on notice as well. But in the light of what you are saying and the difficulty in determining this, should consideration be given to it? Or is it something that you have come across where consideration has been given to it in terms of this food security issue—for governments to look, if you like, at having some sort of trigger legislation that would not allow a foreign entity to export in any given year that might create a food security issue—a bit like a security blanket? Is that something that has been discussed?

Mr Cribb : I am not familiar enough with the law in this area but I presume that, if someone was exporting food and it constituted a risk to Australia's food security, the government could resume the land in the name of the people or the Crown or something like that and just take it back. You can do that if it is a corporation. If it is a country that owns that land, then you might have an argument.

Senator NASH: Thank you.

CHAIR: Could you describe the task that is ahead of us in the building of the food task against the shrinking of the resource? The figure I use is that Asia will have two-thirds of the world's population by 2050 and 30 per cent of its agricultural capacity may have disappeared. Have you got anything else you would like to illuminate to us on that subject? I mean the national interest test for me can also include: if a sovereignty entity enters into the markets in Australia to secure a sovereign task for themselves, they can distort the market because they are not looking for a return on their investment; rather they are looking to secure the task—that is, probably the food task in relation to this inquiry—which then in turn distorts the market for someone like a foreign corporation, superfund or a farmer. They actually want to do it, to grow food and get a return on their money. So that is another distortion. If they remove themselves and their production from the tension in the supply and demand market, then they can interfere with the market. There is whole lot of stuff like that which is all national interest stuff.

Senator EDWARDS: Mr Cribb, in COSMOS magazine you are quoted as saying:

Many countries, including Australia, have not yet grasped that agricultural policy is defence policy, refugee policy, immigration policy and environmental policy as well as health, food and economic policy.

Do you want to elaborate on that?

Mr Cribb : Yes. If you drill down, two-thirds of the wars that have started in the last 30 years worldwide began partly over an argument over food, land and water. When you read about them in the media, you will see that they are an argument between different ethnic groups or religious groups or political groups. But if you go back to the sources of the argument—Rwanda, Darfur, Eritrea—you find that people are fighting over land and water and food to keep their kids alive. With respect to global insecurity, the thing that starts most of the conflicts worldwide is this basic argument over the resources for human survival. If you want to make the world a safer place, you do your best to secure the agricultural system. You cannot have a stable government without a stable agriculture. You cannot have a democracy without a stable agriculture; that has been shown worldwide. This is not me speaking—you can read any of the big defence think tanks. You can read the CIA, the British Ministry of Defence, US Strategic Studies Institute, the Oslo Peace Research Institute, the Stockholm Institute—they all testify to this being a critical factor in what causes people to argue and fight. If we wish to remove one risk of conflict from the world all we have to do is sustain the food supply. This country is rich in knowledge about how to do that. After 10 years of horrific drought, we increased production in this country and that is a mighty achievement. We have knowledge that the world is going to need to sustain its food production. I believe that we should be taking this to the world as Australia's contribution to making the world a peaceful and more stable place.

Senator EDWARDS: What changes do you think we need in the areas of defence, immigration and environment, given those comments?

Mr Cribb : We need to share our knowledge very generously, especially with those areas that are capable of collapsing in terms of their food security—the Indo-Gangetic region, the North China region, Central Asia, the Middle East and North Africa. If any of those regions fell over for a shortage of water or soil loss, or whatever it is—climate change—there would be hundreds of millions of people going in all directions. That would produce knock-on effects right around the world. We would not see a few boats coming every week; we would see thousands.

CHAIR: So, just to put a figure on that, I use the possibility of 1.6 billion people on the planet displaced by 2060-70. If that futuristic?

Mr Cribb : There are a lot of estimates. I think you would have to look at the individual region and say if the Indo-Gangetic region, which currently supports 1.6 billion people, ran out of water then probably 200 or 300 million would leave home in order to find security. In fact many of them are doing so—a quarter of a billion people move every year now anyway. Only a fifth of those are refugees; the rest of them are migrants who are getting out from under because they can see the pressures and stresses of development in their own countries. So there is already this enormous mobility going on. But if there was a food crisis anywhere then that mobility would increase a hundredfold. What can Australia do about that? The answer is we can do the same as we did in the green revolution and share our knowledge generously, and we can invest in food production in other countries to help them stabilise and improve it. That is what the New Zealand dairy company, Fonterra, is doing in the Chinese dairy industry now—they are buying Chinese dairy farms to show them how to milk cows. They are helping to stabilise China's food production and we could do the same sort of thing.

Senator FAWCETT: I completely agree with you on your point about sharing knowledge and the talk about Colombo plans, but to come back to the issue of sovereign ownership of land: is a way to balance their desire for food security and alternate sources, our desire for sovereignty and long-term ownership of our land—and, as the Chair has raised on a number of occasions, the ability to gain some taxable return off their production on our land—to say that sovereign investment is fine, but with the terms of the lease having perhaps a 25-year period as opposed to outright ownership? Is that a possible way forward?

Mr Cribb : I do not know. That depends on the ethics of the government that you are dealing with and how much they might be prepared to use their foothold in Australia as something else. It is very hard to predict that. I think it is better not to have other countries owning bits of Australia.

Senator FAWCETT: Not owning—leasing.

Mr Cribb : Even leasing.

Senator FAWCETT: The thing you talked about before, which is that we could just go and reclaim it, trumpets sovereign risk for other people whether they be corporate or sovereign to come and invest here, and as you rightly pointed out, we have relied on overseas investment for many things. As long as the ground rules are firm: it is a time-limited lease, after which point it reverts to ownership unless we think it is in our national interest for your investment to continue and you are happy to pay and another premium. That gets around the Chair's point about getting that return. If you cannot tax directly, you tax through the lease. Is that a way to balance our need for sovereignty, income and an element of control and their need for that security?

Mr Cribb : Why not just say to them, 'We welcome your investment, but it has to be private investment, not government investment'? The companies who invest here need to be private sector operators, not owned and controlled by a state. As I say, these are the sorts of arguments—like the Rhineland, the Sudetenland and things like that—where countries come to serious misunderstandings about who owns what. So I would not even create a possibility of such a thing happening. That would be my view, personally.

CHAIR: They call it the redefinition of 'sovereignty'—the possibility of all that.

Mr Cribb : But on the other hand, as I say, I also think that instead of sitting around whinging about foreign investment in Australia, which we tend to do a lot of, we ought to be out there. We have a relatively prosperous economy. Why aren't we investing in agriculture in China, South-East Asia, India and elsewhere and helping them achieve agricultural sustainability using our knowledge, skills and technology? That is what the Kiwis are doing, so I think that they are a jump ahead of us in this particular game. They are looking out, whereas we are just sitting here looking in.

Senator COLBECK: That is a good point. You now have some time to think about your answer, as a division is being called. You talked before about land availability. My understanding about China's circumstance is that they have significant issues with land, water and labour. You are right: we do have good technology and we have a really good record in productivity increase. That is the thing that has kept us in the game: our R&D and our productivity increases. But, given those fundamental issues that they have with land and water availability, water quality and also potentially labour supply, we can go in there and give them a hand with all of those sorts of things. How far does the productivity leap take us? You have time to think.

CHAIR: We will suspend for a few minutes for the division.

Proceedings suspended from 17:52 to 18:05

CHAIR: We are back. Richard, if you could just go over the last part of your question so Mr Cribb can pick up what he sees as the answer.

Senator COLBECK: We talked about availability of land, water, labour, water quality and productivity increases, but you talked about the reductions and the pressures particularly on land availability. What I was interested to know is how much the productivity increases might be able to offset some of those land availability issues. I will tack onto that another question, capacity to repair, because you talked about in your initial statement 10 per cent of land is actually improving in quality and we have made some investments here in Australia about improving land over the last ten or 15 years or so and I think that is also going to be an important part of that overall process.

Mr Cribb : Absolutely. Farmers everywhere that I know are thinking how to make the farming system more sustainable. There is cutting-edge knowledge both in Australia, the United States, Europe and elsewhere about how you farm ecologically, and that knowledge needs to be shared at light speed with the other 1.8 billion farmers around the world. So that is one of the big ways that we will tackle this thing, and we will succeed. The other way is that we are creating these enormous cities now of 20, 30 and 40 million people which rely up to 100 per cent on their food arriving in a river of trucks every night. If that river ever broke down because there was a fuel crisis, a local war, a big flood, something like that, you have got a city of 30 or 40 million people potentially starving within two or three days. We know what happens to supermarkets when there is a big flood, because it happened in South-east Queensland recently. The supermarkets get emptied in about 48 hours.

So these big cities are very vulnerable and this is prompting a move worldwide towards the development of urban agriculture, and this is new thinking. It is not just the allotments and public gardens and things like that; it is also highly intensive agriculture. They are talking about growing fish and vegetables in Boston and Manhattan now. There are major developments in Sweden. In Milan they are building the world's first vertical forest. So people are looking at ways to recycle urban water and nutrients into highly intensive forms of agriculture and in some cases what is known as bioculture, which actually avoids farming altogether, it just turns nutrients straight into food via some biological organism. The synthetic sausage that was developed in the Netherlands last year is an example of that. So there are other ways that we can feed humanity and I expect that by the latter part of the century this form of highly intensive urban food production will probably be providing about a third of the world's food. The other two-thirds will continue to be produced on farms in the normal way. The scarcities of land, the very high cost of energy and fertiliser and so on will drive this trend as well. Australia is actually very far behind in this. There are people talking about it and thinking about it in Australia but we are way behind what is happening in Europe and America at the moment.

CHAIR: One last question.

Senator STERLE: Mr Cribb, in your opening statement, point 3 and point 4, you talk about farm land contracting. So before we go out and slash our wrists are we right to assume that as farm land is contracting yield is increasing, productivity is increasing and it is consonant to the population. Is it holding its own, so to speak?

Mr Cribb : No. That is why we are having higher food prices, because worldwide demand for food over the last 10 years has tended to outpace growth in productivity on farms worldwide. There has been growth in productivity, but even in countries like Australia you are seeing a topping out, a stagnation in the rate of yield advances on farms. This is primarily due to the withdrawal by most governments of support for agricultural research and education, and that is a universal trend at the moment. We have taken our eye off the ball, our foot off the accelerator.

CHAIR: Which emphasises your view on the research money and the lack of it. We are eternally grateful for your very interesting presentation. I do recall the select committee, which I think the Greens might have shut down on us. We were going down this track three or four years ago. We will have you back. It is fantastic to hear what you have to say and we are most grateful. Thank you very much.