Is foreign investment in Australian land and water resources a problem?

August 4, 2010


The Australian Senate is in the process of completing an inquiry into the extent of foreign ownership of domestic land and water resources.  There are two basic questions: (1) How much new foreign investment is actually occurring in Australia; and, (2) should domestic agriculture and food industries be concerned?

The Real Estate Institute of Australia has claimed that such investment is increasing, but there is little data to support or refute such a claim.  Partly for this reason, the Greens and the Coalition want all foreign land and water purchases in Australia registered.

Suppose the data, once collected, showed an increase in foreign land and water ownership?  Does it matter?

Many experts say that Australia has long had overseas investment and interest in the food sector and that while it has waxed and waned over time, there seems to have been little disruption to the industry or the availability of food and water.  But some, including some farming groups, warn that if state-owned international companies start to invest in agricultural land or production to secure their own food supplies, there could be an impact on local food availability.  These analysts argue that “when the market, and participation in the local market, is ignored, that’s when there’s a problem.”

Of course all foreign governments or any company owned by them must seek approval from the Foreign Investment Review Board in Australia and a spokesman for that board says that “A steady flow of investment is vital if Australia’s world leading agricultural industry is to develop further and create more wealth and jobs for Australians.”

  1. How might foreign ownership of Australian land and water affect the supply and demand for those resources in Australia?
  2. What might be the effect on equilibrium in Australian land and water markets if foreign investment in those sectors was sharply curtailed?
  3. What is the economic argument for requiring foreign land and water investors to register their purchases with the Australian government?  What is the economic argument against it?
  4. What are the economic arguments for and against the existence of the Foreign Investment Review Board?
  5. China has a different economic system than Australia’s ‘free market’ economy.  Is there an economic difference between foreign investors that have economic systems similar to Australia and those that do not?
  6. Why is it claimed that there is an economic difference between foreign private and state-owned buyers of Australian land and water?

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