Doomsday Chinese whispers illogical
THERE’S something magical about the Outback. For reasons hard to define, we think of those vast open spaces as the “true Australia’’, even though most of us cling to the coast.
We’re sentimental, too, about the cattle kings who tamed the land and they don’t come much grander than Sir Sidney Kidman, the lad who forged an empire that now covers 100,000 sq km.
Now we’re selling his farm to China. No wonder so many Aussies are peeved.
But is it really a bad thing? I confess I wasn’t sure either, so I set out to find answers to a few simple questions.
1. Why are we selling farmland to foreign companies?
Basically, there’s not enough money in our economy to maintain our standard of living. We need foreign investment to grow jobs and fund new technologies and infrastructure.
2. But is it a one-way street?
No. According to the Department of Foreign Affairs and Trade (DFAT), in 2014 Australia invested $1.9 trillion in overseas countries, including $57.9 billion in China.
3. What about food security?
Most Kidman beef is exported anyway. The new owners – comprising Chinese company Dakang Australia with an 80 per cent stake and local company Australian Rural Capital on 20 per cent – want to boost production.
Adelaide University’s Pat Wright, Adjunct Associate Professor of Labour Studies in the School of Social Sciences, says if food security were threatened by such transactions, the government could change Foreign Investment Review Board (FIRB) rules.
4. Will they pay tax here?
The Federal Government introduced new rules this year to try to ensure foreign companies pay tax on any money earned here. The government will also reap considerable capital gains tax revenue.
South Australian Treasurer Tom Koutsantonis says the state will benefit from conveyancing taxes on the sale of land and also on company taxes that are paid to the Commonwealth but eventually flow to the states through federal grants.
“It’s good to see a foreign company wanting to directly invest in Australia – we grow more than enough food for ourselves, we need to grow our international export markets.”
5. Why can’t a local company buy it?
Federal Treasurer Scott Morrison has the FIRB 90 days to review the sale. This will include an independent inquiry as to whether local bidders were given a fair shot.
6. Has the company been checked out?
It will be. Any sale over $15 million is scrutinised if it involves a buyer from China, compared to $1 billion for New Zealand and United States buyers.
7. What are the longterm benefits?
Australian Rural Capital chairman James Jackson, who’s also the chairman of Elders, says the company wants to invest $46.3 million in the first year alone to improve the properties, and will add 50 new employees to the current team of 160.
Prof Wright says we need to better monitor foreign-owned companies and update regulations if we’re not achieving expected benefits. He says it’s also worth noting that the value of this deal to Australia also depends on what S. Kidman and Co does with the money.
Feast Fine Foods owner Richard Gunner agrees that foreign investment is a good thing, but worries that current laws don’t stipulate the use of Australian goods, services and labour. “Australian agriculture was built on foreign investment, but we need to make sure local companies get the flow-on benefits,” he says.
“What’s to say a Chinese company won’t bring pipes or fencing wire or whatever they need across from China?”
8. What if we’re ever at war with China?
Prof Wright says the Australian Army would occupy any Chinese-owned land or businesses in the event of war – as happened with German businesses in World War II.
He says it’s easy to think of Chinese companies engaging in a sort of “economic invasion” if you don’t also consider how much Australia needs the investment.
“It’s not an invasion – it’s a strategic public relations offensive to build international networks and global respect,” Prof Wright says.
On balance and all sentimentality aside, I don’t think there’s anything to fear here.
China has wealth and we have vast open plains and beef to share. Isn’t that a win-win?