THE federal government’s decision to increase scrutiny of foreign direct investment (FDI) in Australian farmland has been welcomed by farmer lobby groups.

President of the National Farmers’ Federation (NFF), Brent Finlay, said the decision to lower the screening threshold of foreign investment in agricultural land from $252 million to $15m was sound policy. Any investment above this size must be approved by the Foreign Investment Review Board (FIRB).

A step towards a register of foreign owned farmland is also underway, with the Australian Tax Office (ATO) collecting information on all foreign purchases, regardless of size from July 1.

Register welcomedThe NFF has long been calling for greater oversight from the FIRB and a transparent register of foreign ownership of agricultural land.

Mr Finlay said the lowering of the threshold was a good way of balancing the need for foreign capital with a system that provided proper scrutiny on investment.

“Foreign investment in Australian agriculture is welcome; it is essential for our continued growth and future prosperity, however, proper scrutiny of investment proposals and a transparent register form the necessary architecture for successful and sustained investment.”

He said another key step was ensuring the ATO data was publicly available.

Victorian Farmers Federation (VFF) president Peter Tuohey echoed Mr Finlay’s sentiments, saying he would like to see the threshold reduced even further.

“The VFF has lobbied for the threshold to be reduced to $5m, to ensure we regulate all significant investment in our most valuable resource – land.”

He said the register was also a great step forward, but called for it to be extended to water resources as well.

“It’s great to see the government take this step, but as the driest continent on earth we need to monitor foreign investment in our water as much as our land,” Mr Tuohey said.

WAFarmers president Dale Park said he hoped the information in the register was meaningful.

“It will hopefully give us the facts about foreign ownership but we await further detail on how robust the information is,” Mr Park said.

Threshold rethink questionedHowever, industry analysts were not so sure of the merit of the decision.

Danny Thomas, CBRE Agribusiness regional director, said while he believed a register was sound policy, the dropping of the threshold smacked of populism.

“The absence of the information likely to be contained in a register has, in my opinion, led the government to make a populist decision to reduce the FIRB threshold, which is likely to prejudice some foreign investment.

He said sovereign funds, which have garnered the majority of attention during the debate on foreign ownership of Aussie farmland, were already subject to a one dollar threshold, so there were no implications for them.

But Mr Thomas said it may drop confidence from managed funds.

“For managers of international funds like pension and endowment funds these changes are likely to be a serious deterrent for them to invest in agricultural land in Australia.

“The changes create an additional level of risk and uncertainty in being able to complete a transaction. It is difficult to see who of the active and aspirational foreign investors will view this change as anything other than dispositive.

Tread carefully: QFFBucking the trend of support from farmer lobby groups was the Queensland Farmers’ Federation (QFF), which called for greater detail around the plans for treatment of foreign investment into agriculture.

QFF CEO Dan Galligan said industry welcomed the implementation of the register, which may provide credible land ownership data so that the issue could be better understood, but he said the lowering of the threshold may mean valuable foreign capital is lost to Australia’s competitors.

“Implementing a lower threshold for FIRB scrutiny ahead of the register being developed pre-empts what it may reveal.

“Lowering the threshold to this specific level may not be the appropriate instrument for dealing with this issue.

“It is unclear what the lower threshold seeks to achieve in the context of the policy change as we don’t know on what basis a sale would be accepted or rejected.

“Without explanation of the long term objective, it risks inconsistency with the government’s objectives around free trade agreements and promoting our sector around the world.”

Buyers won’t be deterredFarm sector analysts and advisors say the only notable potential hurdle ahead for overseas buyers hunting for hectares is the increased workload facing the FIRB and the ATO.

Unless there are some notable changes planned for FIRB’s national interest test assessment, farmers can probably expect just as many land and agribusiness sales to offshore owners after March 1 as beforehand.

“FIRB has never knocked back an agricultural land sale to overseas buyers on national interest grounds, as far as I’m aware,” said Australian Farm Institute executive director Mick Keogh.

“Some people see the government’s changes to its scrutiny of investors as a restriction on foreign buyers, but I don’t see much changing unless components in the national interest test are tightened up.”

– with Andrew Marshall

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