Tuesday, 12 February 2019
Standing Committee on Agriculture and Water Resources; Report
by leave—As the Deputy Chair of the Standing Committee on Agriculture and Water Resources, I welcome this report into superannuation fund investment in agriculture in Australia. Firstly, I'd like to thank the chair, the member for O'Connor, Rick Wilson, and the rest of the committee, who, as the chair said, did work incredibly hard on this inquiry. Also, to Joel, Jeff and the secretariat: thank you for your attention to detail and persistence with what, when we first set out on this journey, we thought might be a difficult, dry and hard-to-get-to-the-bottom-of inquiry, and in some ways it was, but it also turned up some very interesting findings. I'd also thank all of those who made a submission to the inquiry and attended the public hearings.
As the opening statement of this report says:
Agricultural commodities provide approximately $60 billion annually to the Australian economy, making the sector a major economic contributor.
Yet it does have the potential to be so much bigger. Australian agriculture is uniquely appealing due to the size of our nation; our proximity to the Asian economies, allowing exportation opportunities; and the variety of climatic zones that enable producers to offer a diverse range of commodities. The group chairman of Duxton Asset Management, Mr Ed Peter, explained to the committee during one of the hearings that the benefit of investing in agriculture over some other assets, like energy, metals and mining, is that agriculture is 'a gift that keeps on giving'. He stated:
With both energy and metals and mining, once I dig it out, it's gone. Ag is a gift that keeps on giving. As long as I husband my land, I will get a return every year.
Interestingly, both ASIC and APRA indicate that no specific regulatory or legislative barriers to agricultural investment exist within their remits. Yet, despite this, industry analysis suggests that Australian superannuation funds hold only a very small portion of farm assets in Australia. It was the duty of the committee to understand why.
This inquiry analysed a number of perceived barriers preventing the potential of superannuation fund investment in agriculture in Australia. This analysis came to a few important conclusions. Firstly, the risk-return profile of agricultural investment, in any suitably large scale, is unacceptable to superannuation funds in Australia, especially as data and market understandings contribute to investment scepticism. Secondly, the impact on the agricultural sector from environmental influences poses too great a risk. While other sectors can alter the impact of a changing environment by perhaps changing practices or sources of materials, agriculture is generally bound to the land, water and climate of the region in which it's located. Thirdly, investors are concerned about the ethical factors that are tied to the agriculture industry, such as greenhouse gas emissions; deforestation and biodiversity loss; waste and water pollution; and animal welfare. Finally, the insufficient amount of reliable data about the Australian agricultural sector is problematic to the industry.
As identified throughout this report, the cause of low superannuation investment in Australian agriculture is complex, and it's actually contested. No one single barrier, regulatory or otherwise, really is to blame. It seems to be a confluence of many different things. The recommendations put forward by the committee will be a first step towards addressing some of these important points.
I'd like to finish by citing the conclusion from the report as it, effectively, represents the findings from the inquiry:
The Committee does not believe that the issues identified and the recommendations outlined in this report will solve this issue overnight.
It is a big issue. We do want to see more superannuation put into our agricultural sector. It's a big and complex question. However, there is room for incremental improvement in the data capture and the analysis. Unintended taxation impacts and sector understanding are two other really important components of it.
The recommendations outlined in this report will, hopefully, lead to a change in both the superannuation and financial sector and the agricultural sector to bring about mutually beneficial relationships. That will be the key to this—that we do see enough investment in our Australian agricultural industry, as is so desperately required. Many Australians, I believe, want to see their superannuation go towards the agricultural sector, but we need to concentrate on the factors we learned in the inquiry to see that this happens.