Australia: Agribusiness: will it blossom or go to seed under the new Coalition Government?

Last Updated: 14 September 2013
Article by Karen Evans-Cullen, Adam Foreman and Paul Wyper

Most Read Contributor in Australia, November 2017

Key Points:

The new Coalition Government will have to consider foreign investment in agricultural land and agribusinesses, a national food plan and food policy, and developing Northern Australia.

The agribusiness sector is one area which is likely to present both great challenges and opportunities for the new Coalition Government in its first term – we outline some of the key ones below.

Foreign investment in agricultural land and agribusinesses

One of the first jobs for the new Treasurer will likely be ruling on whether US food processor and commodities trader Archer Daniels Midland can acquire east coast grain handler Graincorp.

Mr Hockey must be wishing that the Graincorp merger could have been done and dusted before the election. That would have given the Government some breathing space to develop a compromise foreign investment policy that satisfied the two sides of the Coalition – the Nationals which have traditionally favoured protecting the interests of its predominantly family-owned farming constituents and the Liberal Party which has more often taken a pragmatic and economic rationalist approach on these matters.

As it is, Mr Hockey faces a situation in which the merger is stridently opposed by members of both his own party and their Coalition partners. Only a few weeks before the election, the Coalition-dominated Senate Rural and Regional Affairs and Transport References Committee attacked the merger in no uncertain terms:

  • it recommended that the ACCC reopen its review of the competition effects of the merger;
  • it recommended that, before making its recommendation to the Treasurer, the Foreign Investment Review Board (FIRB) consider what the Committee claimed were a number of potential negative aspects of the merger;
  • it flagged that, following the election, the Committee intends to resume its inquiry which has focused on the merger by taking evidence from further parties.

At this stage, Mr Hockey's best hope is probably a FIRB recommendation against the merger. It seems unlikely to us that the ACCC would decide to re-open its investigation. If he followed that recommendation, Mr Hockey would assuage the Committee without giving the impression to the market that he himself was opposed to the merger.

He could then begin the more difficult process of crafting a long-term foreign investment policy.

It appears almost inevitable that agribusiness will feature significantly in that policy. Comments made during the election indicate that there will almost definitely be a register of foreign ownership of farmland and agribusinesses. Also on the agenda is a possible lowering of the notification threshold to A$15 million for farmland acquisitions and $54 million for agribusinesses (from A$1078 million for US and NZ investors and A$248 million for investors from other companies).

Apart from further complicating the range of different thresholds which apply to foreign investment, it is unclear what these changes would achieve: evidence to the Senate committee inquiring into the "national interest" test seemed to show that the overwhelming majority of agricultural acquisitions would be below even a A$15 million threshold.

Despite these particular pressures which will be brought to bear, the Australian business community would be hoping that the Coalition will continue its policy of welcoming foreign investment in this country, which will play an important role in helping businesses, particularly in the agribusiness sector, to grow and be more efficient, innovative and competitive going forward. This would also be consistent with Tony Abbott's comment during his election victory speech that Australia was now "open for business".

National food plan and food policy

Away from the foreign investment debate, agribusiness policy does look set to enjoy greater attention under the new government.

During the election, the then Opposition derided the ALP proposal for a national food plan. Shadow Minister for Agriculture John Cobb indicated that the Coalition saw the removal of red-tape cost burdens and the introduction of more flexible labour arrangements (such as split shifts for workers on dairy farms) as a higher priority than funding to research Asian markets.

However, it is notable that Coalition State Governments have been more enthusiastic about developing ambitious agribusiness policies: Queensland, NSW and Victoria have all announced either a major food policy or their intention to develop such a policy, including:

  • the Queensland Government recently released its 2040 Strategic Vision for agriculture;
  • the NSW Government has issued an Issues Paper for a NSW Agriculture Industry Action Plan;
  • the Victorian Government has established a taskforce to develop a Victorian food strategy;
  • the WA Department of Agriculture and Food has commissioned a report into the state of the agricultural sector and it growth, profitability and sustainability.

Although the Coalition is less committed to central government than the ALP, we would not be surprised if the level of activity at the State-level produced some response from Canberra – if for no other reason than to forestall the possibility of counter-productive competition between the States.

Developing Northern Australia

One area where the Coalition has already provided some policy guidance is its "2030 Vision for Developing Northern Australia". Released earlier this year, the paper sets out a number of policy initiatives designed to drive growth in Northern Australia, including by developing a food bowl which would double Australia's agricultural output.

The initiatives, which will be considered more fully in a White Paper to be released within the next 12 months, include:

  • working with the States and Northern Territory to reduce unnecessary bureaucracy, green and red tape;
  • looking to build on existing key urban zones including by targeting relocation incentives and personal and business tax incentives;
  • tasking Infrastructure Australia to devise a 15 year rolling priority list of infrastructure projects in Northern Australia;
  • accelerating the conclusion of bilateral free trade and taxation agreements;
  • considering the establishment of a Water Project Development Fund to support proposals for water infrastructure in Northern Australia, including dams and groundwater projects;
  • allocating funds from the foreign aid budget to advance tropical health and medical research in Northern Australia;
  • relocating relevant Federal departments and Commonwealth agencies (such as CSIRO and AQIS) to Northern Australia.

While Labor criticised various aspects of these initiatives when they were announced, Labor subsequently announced in August its own (very similar) proposals for a "Northern Economic Zone" including a reduced company tax rate and a commitment to fund a further expansion of the Ord River Irrigation Scheme. It will be interesting to see to what extent the Coalition picks up on the specific ideas put forward as part of Labor's proposals.

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

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