House debates

Monday, 20 June 2011

Grievance Debate

Food Security

9:41 pm

Photo of Josh FrydenbergJosh Frydenberg (Kooyong, Liberal Party) Share this | Hansard source

You do not have to look far in our daily media cycle to find an attention-grabbing headline about the issue of food security. The Sydney Morning Herald bellows 'A new food crisis on our plates', the Adelaide Advertiser warns that it is 'Time to stop selling the farm' and just yesterday in my own state of Victoria the Sunday Age led with 'Qatar land grab angers bush' on its front page.

The truth is that Australia is not about to starve. We produce considerably more food than we consume. We export 60 per cent of all our agricultural produce which has created a thriving industry worth $24.5 billion in 2009-10 alone. But these statistics do not tell us the complete story because there are two major international developments of which we must be aware and be prepared for. The first is the inexorable upward pressure on global food prices which is ultimately leading to shortages and intrastate and interstate tensions. There is a series of complex reasons on both the demand and supply side for this trend. As a developed nation with specific expertise in food production we have a capacity and responsibility to contribute to the global response to the food security issue. The second development relates to the deliberate policies of those countries with potential food shortages to acquire agricultural-producing assets including arable land in developing and developed countries alike. Australia, like a number of other nations, has been the focus of increased in-bound investment in its agricultural sector. Given the sensitivities involved, we do need greater transparency and scrutiny of such investments to ensure they pass the national interest test.

I will now speak in more detail about both these developments. It was in 1798 that the English scholar the Reverend Thomas Malthus issued his grim warning, 'that a gigantic inevitable famine stalks in the rear' as a result of the consumption demands of an ever-growing population. Fortunately the world's population—then 800 million—went on to prosper and the prophecy came to nothing. However, the rapid growth in the world's population, now 6.9 billion and estimated to surpass nine billion by 2050, has created and is creating significant stress on the food supply chain.

Today it is estimated by the Food and Agriculture Organisation that 925 million people do not have sufficient food to eat and with much of the population growth in Africa and Asia, where countries like Ethiopia, Niger and Uganda already suffer food security issues, existing food shortages will become more acute. The potential for spillover into domestic unrest is real with food shortages and price hikes in the Middle East being a contributing factor to the dramatic developments we recently saw in Tunisia, Egypt and elsewhere. It is for this reason that Bob Zoellick, former US Deputy Secretary of State and now head of the World Bank, said that food security is now a global security issue. With maize prices up 73 per cent in the last six months and the Food and Agricultural Organisation's food price index just below its 2008 global food crisis peak, Zoellick has said that prices are now at dangerous levels.

To understand what is happening now, it is important to recount the developments leading up to the crisis of 2008 when rice prices tripled in just 12 months and world grain prices more than doubled. At the time the World Bank warned that up to 33 countries were unstable due to rapid price hikes that had seen 100 million people fall into poverty. On the demand side there were a number of factors, including a more prosperous and growing population whose food preferences, particularly among the middle classes in China and India, were for higher calorie products, including meat. With one kilogram of beef requiring seven kilograms of feed grain, the implications for demand are obvious.

The expansion of the biofuel industry—production tripling between 2000 and 2007—also had a major impact. It was estimated by the FAO in 2007 that more than 100 million tonnes of cereals were diverted annually from food production to fuel production. Speculation by commodity investors also soared, with Alan DuPont and Mark Thirlwell pointing out in a significant article in the international journal Survival that the level of large institutional investment in the commodity index was around $10 billion in 2000 but had risen to a whopping $250 billion in 2008. Such an explosion in demand for commodity contracts adds both to the upward price pressures and the market volatility. On the supply side, rising energy prices impacted on the cost of inputs, including fertiliser. Extreme adverse weather events—droughts in Australia, Russia and Ukraine and floods in northern Europe—soil degradation and water scarcity were all significant factors.

We are not talking small numbers. The United Nations Environment Programme estimates that human activity has precipitated soil degradation across 2 billion hectares of vegetated land and estimates that up to half the world's population will be living in areas under extreme water stress in the next 15 years. The prognosis is dire.

The reality is that all the factors we saw at play in 2008 are again on the rise—higher energy costs, extreme weather events and water scarcity. Those supply factors and of course the upward trajectory of millions of people in China and India into the burgeoning middle class will only ensure that, when it comes to food consumption and production, demand will exceed supply. With global food production needing to double over the next 30 years, the status quo is no longer enough. That is where Australia must play a lead role. We have the institutions in place—the Australian aid agency, AusAID, and the Australian Centre for International Agricultural Research are cases in point. They can direct financial support and expertise into developing countries, particularly in our region, to support sustainable production practices and programs. The adaptation of innovative technologies and approaches is a proven path to better productivity and crop yields.

We must also do all we can within the international institutional framework. This includes generating international support to bring the decade-long Doha round of free trade negotiations to a positive end—if we eventually see a reduction in the extensive European agricultural subsidies, we will stimulate greater production in developing countries. We have a special opportunity as hosts of the Commonwealth Heads of Government Meeting, CHOGM, in Western Australia later this year to push for coordinated international action on the present food security issue. Most of all, this issue needs the attention of our Prime Minister and our Minister for Foreign Affairs because it is a security issue as well as a humanitarian one. Only if it gets the necessary attention will we have the chance of heading off the next, inevitable, food crisis.

In light of these international developments, it is totally predictable and understandable that a number of other countries, particularly the more wealthy ones, are sending their sovereign wealth funds abroad in an attempt to lock up agricultural assets abroad. There are reports that the Qataris have taken control of thousands of arable hectares in Kenya, that the South Koreans are in the Sudan and that the Bahrainis are in Turkey. Just recently Hassad Foods, which is owned by the Qatar government, has bought—as revealed in the Sunday Agemore than 8,000 hectares in Victoria's Western District. This follows soon after its purchase of more than 2,500 hectares of Victorian farming land the previous year. Other examples of foreign government owned entities entering Australia's market abound.

The issue is not with foreign investment per se; foreign investment is a significant enabler for Australia. Our economy would not have developed in the way it has without billions of dollars of foreign investment giving our resource, manufacturing and other industries the capacity to capitalise on the opportunities available. But at the same time we need to know more than we do about who is investing in our agricultural sector and why. The current rules governing foreign investment are opaque and the national interest test is ill-defined. In the words of Patrick Colmer, the executive member of the Foreign Investment Review Board and a senior Treasury official:

The way that the legislation is set up is that the default position is that the investment is allowed to proceed.

What is more, the threshold for consideration by FIRB for a foreign investor in Australian agricultural land is a purchase price over $231 million. Compare this to New Zealand, where the Overseas Investment Act 2005 requires government consent before a foreign investment in any rural land acquisition exceeding five hectares can proceed. Indeed, when Treasury's Patrick Colmer appeared last year before my colleague Senator Heffernan in his capacity as the chair of the Senate Select Committee on Agriculture and Related Industries, he was asked by the senator:

You could acquire an entire district, just farm by farm by farm, with a foreign entity and it would never come on your radar?

The response from Colmer was:

It is quite possible, yes

It is clearly inadequate to have a situation where these acquisitions can go under the radar and where we find ourselves in a position in which we do not have a reliable and comprehensive register of information about foreign investments in Australian agricultural assets.

Labor is clearly cognisant of the growing community concern about this issue but is sitting on its hands. While the Assistant Treasurer is happy to talk the talk by posing the big questions—such as, 'Is land being bought up by foreign interests?' and 'Are we losing control of our food and water?'—he offers no serious follow-up. The coalition, however, have moved a motion in parliament to request the Productivity Commission to gather data on foreign ownership of agricultural land and agricultural businesses. In doing so, we want to facilitate an informed constructive, bipartisan public consultation about foreign investment in our agricultural sector, as this issue will only become more sensitive and important.

The Australian community needs to appreciate that food security is a global issue of the utmost importance. It is not merely an issue of development but one of war and peace. What is more, those countries most acutely affected are taking preventive action to secure food supplies ahead of the next food crisis. Australia has a responsibility to help our neighbours and friends around the world who will be affected by price hikes and shortages. At the same time we need to do all we can to ensure that, when it comes to foreign investment in our precious agricultural sector, we have greater transparency so that it can be more effectively determined whether a particular acquisition is in the national interest. (Time expired)

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