AUSTRALIA has always been a trading nation that has required foreign capital and that will continue into the future, according to Secretary of the Australia Treasury John Fraser.
Speaking at this week’s Victorian Farmers Federation (VFF) grains conference in Horsham, Mr Fraser countered arguments that foreign investment was pricing young local farmers out of the industry.
“Agricultural land purchases in particular have been tightened up and every acquisition of new and existing businesses must be approved by the Foreign Investment Review Board (FIRB).”
“I know there are anecdotes around of farmers unable to buy land as it wasn’t offered publicly before being purchased by foreign interests, but it is a requirement of the board that the land must be offered to the market as part of a sale.”
He said rather than viewing potential foreign investors as a threat, Australian growers needed to identify opportunities
Mr Fraser said caution needed to be taken to protect Australia’s national interest, but said foreign investment was necessary to allow the sector to grow to its full potential.
“We have to ensure we are not too generous, for instance in China I could not own more than 49pc of a business or buy a flat, so they are also looking out for their interests, but equally we need to recognise the benefits this capital can have, particularly in agriculture.”
Mr Fraser said the Australian investment community as a whole had traditionally steered clear of agriculture, spooked by its variable earning capacity.
“In my time in the US with (bank) UBS we negotiated deals to purchase agricultural land but it something that is difficult to put together here.”
He said it was not an issue to do with Australian Prudential Regulation Authority (APRA) regulations but rather market sentiment.
“Investors tend to prefer more stable income streams than agriculture.”
This was a point echoed by ANZ head of agribusiness Mark Bennett who said lowering earnings volatility would be critical in attracting external capital.
“Farmers should to look at ways at creating systems where they have the stability of earnings that gives outside investors more confidence.”
Mr Fraser said foreign investment could benefit agriculture outside of direct investment in the sector.
“I have been hearing here at this meeting of the pressing need for infrastructure, but it costs money and foreign investment can be one way of funding these projects.”
“For Treasury to fund these big ticket infrastructure projects it would mean raising more revenue and Australia already has a high tax rate compared to other nations.”