Australian farmland remains fertile ground for foreign investors
Gavin Clancy, Senior Consultant, Lunik
Foreign ownership of land – particularly agricultural land – continues to generate debate in Australia.
With Australia’s reputation as a proven agricultural producer and exporter, farmland remains an attractive investment target for foreign investors.
Pension funds, for example, like Australian farmland for its long-term returns and security.
But foreign investment attracts its share of critics, who claim that Australia should not be surrendering its advantages in food and fibre production to overseas interests.
Statistics on foreign investment in Australian agriculture provide some context.
The Foreign Investment Review Board’s (FIRB) Register of Foreign Ownership of Australian Agricultural Land reveals that at 30 June 2020, foreign interests held 53 million hectares of agricultural land in Australia.
That equated to 13.8 per cent of the total 383 million hectares in agricultural land in the nation, or almost 10,000 individual properties. The percentage of farmland held in foreign hands has remained steady since 2015.
Of the 53 million hectares registered to foreign investors, Australian interests held 13.5 million hectares in share with the overseas entities.
While China ranked number nine of total foreign investment in Australia, it occupied the number one position among foreign investors in agricultural land holdings in 2020.
As at 30 June 2020, it was the largest foreign holder of agricultural land, with almost 9.2 million ha, or 2.4 per cent of Australia’s agricultural land. UK interests held 8.1 million ha (2.1 per cent), followed by The Netherlands (2.8 million ha), the USA (2.7 million ha) and Canada (2.6 million ha).
Note the definition of land-holder: that includes lease-holdings, as well as freehold title.
In total, the FIRB report found 83 per cent of foreign-held land was on a leasehold basis.
More than 90 per cent of Chinese-held agricultural hectares in Australia was of leasehold land. Of the freehold land, however, investors from The Netherlands held twice the level of Chinese holdings, with almost 1.65 million ha, followed by the US (1.31 million ha).
More than 45 million hectares of the total foreign investment portfolio were devoted to livestock, with almost two million ha in cropping and 1.4 million ha in forestry enterprises.
Tasmania (26.2 per cent) and Northern Territory (25.8 per cent) had the biggest foreign share of total farmland within their jurisdiction. NSW and Victoria each had less than six per cent of farmland held by foreign owners.
The FIRB report was released last year as Federal Treasury was developing reforms to the Australia’s foreign investment review framework.
In a submission on the proposed reforms, the National Farmers Federation supported foreign investment on the grounds that it permitted more capital investment than domestic savings would have otherwise allowed.
It cited a 2012 study that estimated the industry would need to fill a $515 billion capital shortfall between 2012 and 2050, if Australian were to remain competitive with other agriculture-exporting nations.
The NFF also noted that foreign investment may have other spillover effects by providing access to new technologies and better management practices, as well as contributing to deeper integration with international supply chains and increased competition.
In its submission, the NFF supported current requirements that foreign investment in agricultural land be approved by FIRB, where the cumulative value of the investor’s land holdings exceeded $15 million, and a similar threshold of $55 million for agribusiness.
Those thresholds were temporarily reduced to $0 in late March last year as the Federal Government moved to “safeguard the national interest” in its response to the coronavirus outbreak.
Under the reforms proposed and passed via the Foreign Acquisitions and Takeovers Act 1975 last year, all investments in sensitive national security land or businesses will require government approval – regardless of value.
Potentially, that could include farmland.
In this case, the ‘national interest test’ will prevail, regardless of the economic contribution of foreign investment in Australian farmland.