Last week, the opportunity to submit comments on the Australian government’s Agricultural Competitiveness Taskforce green paper ended. The initiative, which will produce a white paper next year, aims to boost the sector’s productivity and profitability. Here, Barnaby Joyce, agriculture minister of Australia, talks about some of the challenges and opportunities posed during the process.
What was the motivation behind the competitiveness taskforce?
The Prime Minister released the Government’s Industry Innovation and Competitiveness Agenda on 14 October 2014. The Agenda is the Government’s plan to provide a competitive environment that allows businesses to create the jobs needed for strong, secure communities.
One of the reform initiatives proposed in this agenda is the establishment of industry growth centres, including one for food and agribusiness. Some $188.5m will be spent on the Industry Growth Centres initiative over four years. Each of the five centres will receive funding of up to $3.5 million per year.
A Food and Agribusiness Industry Growth Centre may be involved in projects to help small and medium food processing businesses to research Asian consumer preferences about taste, texture and packaging. This sort of information may currently only be accessible to larger companies. Other projects could include assistance with developing desired product characteristics, advice with intellectual property, marketing and country=specific exporting intelligence or working with regulators to improve the efficiency of the regulatory framework while maintaining Australia’s reputation for food safety.
What are the main challenges for Australia’s agriculture market today and where is most investment needed?
The Agricultural Competiveness Green Paper sets out the range of challenges facing agriculture, such as building infrastructure to create links to markets, reducing unnecessary regulatory burden and creating rewarding career paths. However it is clear that, on average, profitability in Australian agriculture is low, particularly given the riskiness of the business. One key objective for the Australian Government’s agricultural policy is to achieve a better return at the farm gate to ensure a sustainable and competitive Australian agriculture sector.
Ultimately, if this objective is attained then investment in Australian agriculture will follow, more export income will be earned, regional communities will be stronger, better jobs will be created and the health of our economy and nation will be strengthened.
According to the 2012 report Greener Pastures: the global soft commodity opportunity for Australia and New Zealand, commissioned by ANZ Bank, an estimated A$600 billion in capital investment is needed by 2050 to generate growth and profitability in Australian agriculture.
Both domestic and foreign sources of investment will be vital to meeting this need and realising Australian agriculture’s potential for further growth, innovation and development. However, it is critical that checks and balances are in place to ensure foreign investments are not contrary to Australia’s national interest and provide flow-on benefits for farmers and rural communities. This is the responsibility of the Treasury portfolio.
Where is the most investment coming from currently?
In 2012-13 proposed investment in the agriculture, forestry and fishing sector represented around two per cent of the total value of investment proposals approved by the Foreign Investment Review Board (FIRB).
The FIRB Annual Report 2012-13 noted that proposed investment in the agriculture, forestry and fishing sector decreased from $3.6 billion in 2011-12 to $2.9 billion in 2012-13.
The largest source country of proposed investments by value in the agriculture, forestry and fishing sector was reported to be the United States ($0.9 billion), followed by Canada ($0.6 billion) and Singapore ($0.4 billion).
In the same year, the FIRB approved $135.7 billion of total proposed investment. The United States ($20.6 billion) was the largest source country for total approved proposed investment, followed by Switzerland ($18.4 billion), China ($15.8 billion), Canada ($14.4 billion) and the United Kingdom ($6.8 billion).
Please note, investment proposals submitted to the FIRB in this sector are inherently irregular and can be skewed by large transactions with several competing bidders. There can also be substantial differences between proposed and actual investment flows.
Do you think the FIRB approval process might be off-putting for investors?
Australia’s foreign investment review process provides for the Treasurer to block proposals found to be contrary to the national interest, or impose conditions or undertakings to address national interest concerns.
The great majority of foreign investors seeking constructive involvement in Australian agriculture will not be concerned by our approval processes.
Australia is a sought-after destination for investment. Our proximity to Asia, reputation for safe, healthy and high quality foods together with strong trade and cultural links to Asia create a potent mix to help meet the forecast demand growth in the region.
As you have commented before, the superannuation funds are not big investors into agriculture. How can you, and the market more generally, change this?
The Agricultural Competiveness White Paper is considering finance mechanisms, including investment in the agriculture sector by superannuation funds, to provide farmers with the capital they need to grow.
One suggestion from stakeholders set out in the Agricultural Competiveness Green Paper is that financial instruments could be developed to allow superannuation funds to invest directly in farm businesses. This could involve the creation of superannuation products that exchange cash for partial equity in a farm.
Not all options discussed in the Green Paper will be taken forward in the White Paper. We are looking for views on those ideas that will make the most difference.
Does the super industry need to change to allow for it to invest more in long term agri assets?
The objectives of the Australian superannuation system are to provide an adequate level of retirement income for Australians; relieve pressure on the Age Pension; and increase national savings, creating a pool of patient capital to be invested by the respective trustees of those funds. Superannuation policy is the responsibility of the Treasurer.
My interest is to achieve a better return at the farm gate to ensure a sustainable and competitive Australian agriculture sector. Ultimately, if this objective is attained then investment in Australian agriculture will follow from a range of sources, including from superannuation funds.