Monday, 15 June 2020
Private Members' Business
That this House:
(1) notes that:
(a) water is a scarce and highly valuable resource in Australia; and
(b) Australia is prone to droughts and many parts of our country have recently experienced their worst droughts in living memory;
(2) registers its concern that:
(a) foreign entities, some implicitly backed by foreign governments, are substantially increasing their holdings of Australian water rights;
(b) Australian agriculturalists are increasingly competing with these foreign entities to secure the water rights upon which their livelihoods depend; and
(c) the acquisition of water rights is not directly subject to the approval of the Foreign Investment Review Board;
(3) congratulates the Government on committing to reform the legislation governing the Foreign Investment Review Board; and
(4) calls upon the Government to, in those reforms:
(a) ensure that water rights are directly subject to Foreign Investment Review Board approval, independent to the acquisition of agricultural land to which those rights sometimes attach; and
(b) lower the threshold for Foreign Investment Review Board approval for agricultural and water rights to $5 million.
It is often said that Australia is a great trading nation. An Australia that is open to the world, to new ideas and to trade and foreign investment opportunities is an Australia with a bright future. However, when foreign interests seek to take significant ownership or control of an asset of national importance, we must always ensure that we fully scrutinise that purchase thoroughly and, most importantly, subject it to public interest.
The interest in Australian farming by foreign investors has grown considerably. The share of agriculture in total foreign investment has risen from 0.1 per cent in 2006-7 to 2.1 per cent by 2011-12. Stock Journal reported this year that 13.4 per cent of Australian farmland had some level of foreign ownership. Farming and land are very much attached to water. Unfortunately, foreign dollars have been all too blinding of our policymakers, and they're blinding them to the short- and long-term risks to our livelihoods and our national security. For these reasons, Centre Alliance and former senator Nick Xenophon have always advocated for more stringent security and scrutiny of foreign investment. We all know too well the Port of Darwin example, but today I wish to focus on the importance of making water right purchases subject to government approval.
Like many, I was utterly astounded to learn that foreigners can purchase any amount of Australian water rights without the need for review by the Foreign Investment Review Board. The Treasurer's announcement that the government is looking to legislation in this space for consultation in July is to be welcomed and commended, but the government's media release did not mention water rights, and it must. It is the perfect truism to observe that water is a limited and scarce resource in Australia. Australia is the driest continent on the planet. Coming from the driest state in the country, I feel like this is even more of an issue in South Australia. For us, water is liquid gold. The lifeblood of Australian farming livelihoods is water, and it always will be water. Current and future generations of Australian farmers need reliable access to water to safeguard their livelihoods.
It's easy to resort to nostalgia and sentiment to oppose foreign investment, but I want to be clear that government scrutiny on these decisions should be based on a clear-eyed view of the long-term benefits to Australia. I recognise that foreign investment has the potential to increase jobs and, potentially, tax income for the government; however, this potential has not always been realised. The average Australian farmer can be guaranteed to spend their money within the Australian economy, even if it is on foreign imports sold by local businesses. Thus when water or agricultural rights are sold to foreigners, the cost to future generations of Australians is substantial and looks set to be multigenerational. You can only sell the farm once. You can only sell the water rights once.
Of course, sometimes foreign investment is needed because domestic funds are not always available to develop farm businesses or assets. However, I have always advocated that there are other ways to resolve this quandary, such as joint investment models. We do not need to resign ourselves to thinking that every sale of any substantial farmer asset should be a foreign takeover. We should have greater flexibility across our local Australian superannuation and across other measures to make sure that we can retain as much as possible in Australian hands.
Another clear-eyed reason for subjecting sizable foreign purchases of water to scrutiny is to guard against the destructive speculation occurring within the Australian water markets. Water markets are not like the Australian stock market. Unlike the human creativity and entrepreneurship that we see in the stock market, water is a finite resource. It is limited, it is capped and it cannot reasonably be expected to grow. Speculative manipulation without productive gain can destroy, and is destroying, Australian livelihoods.
The lack of government scrutiny on foreign purchase of Australian water rights is a patient loophole that urgently needs to be closed. I call on the government to include water rights within their Foreign Investment Review Board reforms.
I support the member for Mayo's motion in relation to including purchases of water to be subject to the Foreign Investment Review Board. This would obviously apply to permanent water and long-term leases, but obviously wouldn't apply to the purchases of temporary water right, which many farmers obviously need as a way of maintaining their traditional day-to-day farming businesses. The ability to purchase water in opportunistic times is just an everyday part of running a farm; it doesn't matter whether you are in South Australia, New South Wales or Victoria.
Right now the ACCC is investigating the water trading and the operations around water trading in the lower Murray and lower Darling reaches, and that's something that we are really looking forward to with anticipation. There has been serious speculation that water traders and water barons have been manipulating the water prices in dry times, which is incredibly heartless if it is true. We are really hoping that the ACCC and their inquiry will get to the bottom of this. We fully expect that the government will be able, through the consultation period, to include that permanent purchases of water will be subject to the Foreign Investment Review Board. So we are fully expecting that the member's motion will in fact be agreed to.
Foreign investment in water is quite important, but it is not as important as what happens to the water that we have available each and every year. It has been found through various inquiries and through, predominantly, the Keelty report, that over 370 gigalitres per annum of additional water is flowing down the river than what is modelled and what we are told is actually flowing. On average, an additional 375 gigalitres every year goes over the border into South Australia. That water isn't used for agriculture, it is not used for the environment, it is not put in as some sort of dilution flow and nor is it quantified as conveyance water. It is simply unaccounted for, unmodeled quantities of water.
We also understand that over 800 gigalitres a year evaporates from the lower reaches, from the Lower Lakes. This water is simply put down into the Lower Lakes to keep the Lower Lakes fresh and to keep the Murray mouth open. We know that the Murray mouth will never be kept open by using fresh water coming out of the Murray River. The Murray mouth will be kept open by the tidal movements of the ocean and the tides coming in and out and it will be kept open by dredges. That has been the case for many, many years now. So to think that we still have the Murray mouth being kept open as an environmental objective is actually laughable. This water is desperately needed in our agricultural communities, and to have 800 gigalitres evaporating in the Lower Lakes is very difficult for the agricultural sector and the communities upstream to accept, especially when you think that 50 gigalitres was enough evaporation for us to close down Mokoan. We closed down the Mokoan irrigation system because there was 50 gigalitres of evaporation. Everybody accepted the pain, the hurt and the detriment that went with that decision to close down the Mokoan irrigation system, because 50 gigalitres of evaporation in that program was deemed to be too much; yet we can turn a blind eye to 800 gigalitres of water evaporating from the lower reaches and the Lower Lakes of the Murray at Lake Alexandria and Lake Albert.
So we need to be very, very conscious and careful when we make a big deal about foreign investment. It's an issue and we need to address it—and I believe the government will address it in relation to its recent announcements—but we have to understand that foreign investors can't actually buy the water and take it with them. The only way foreign investors can make money out of the water that they purchase is to sell it to a farmer in the Murray-Darling Basin. They have to sell it to a productive farmer who is going to use it to grow something.
We have issues with water barons being able to manipulate the market, and we have to stamp that out. We also have issues with retired farmers who have done everything right but their action in providing for their own retirement by sitting on parcels of water and selling them at the most opportune time is also detrimental to the agricultural sector. So there is a whole raft of issues. This is one of them, and we are addressing this issue.
The motion moved by the member for Mayo raises a matter that has been the subject of much public discussion over recent years. It is a topic about which there is very little accurate information available, partly because water ownership is not well documented and also because individual states maintain their own records, there are over 150 different types of water ownerships available and there is constant change in ownership. It is very much a muddled system, so much so that local Makin resident Bob O'Brien, who I have come to know well, was motivated to write a book on water ownership in Australia. His book, titled Water Barons: Money, politics and control of water in Australiais still in draft form. I've seen a copy of that draft. It provides the clearest explanation I've come across of water ownership in Australia. Information in the book has been thoroughly researched. Bob was a water investor for several years; so he understands the subject matter very well. According to the latest information we have, 10 per cent of Murray-Darling Basin water—that is, around 1.85 gigalitres—is foreign owned. How much impact that has on water prices is unclear; nor do we know how much water is held by Australian entities, individuals and farmers who also profit from buying and selling water allocations. I note that the Productivity Commission is doing some work on this and was meant to have provided the government with a report or interim report only recently. From the limited information that we have available, both the US and China, at 1.9 per cent each, were the two largest foreign water holders. The UK came next, at 1.1 per cent. I also note with interest that total Chinese investment in Australia dropped markedly from $8.2 billion in 2018 to $3.4 billion in 2019, with 43 per cent fewer deals struck. That was the lowest level since 2008.
The government's recent announcement that sensitive national security business will also be subject to FIRB approval, regardless of value, does not make clear whether water ownership will be affected. Why sensitive national security was never a consideration is beyond me. Notwithstanding, good public policy should always be evidence based.
For Murray-Darling Basin growers, access to water at affordable prices is key to their viability. The mismanagement and overallocation of water by state authorities, the continued bickering between the states, the diversion of surface water before it enters the river system and the commitment by all jurisdictions to a sustainable plan without then being undermined by parties to that commitment, are also issues that must be addressed for basin farmers to operate with a reasonable level of certainty—and they need certainty in order to plan for their own future.
I have spoken to basin farmers who have paid around $10,000 a hectare for the water they need to produce their crops at times when it is critically needed. At those prices, they simply cannot operate, and it makes their operations unviable. I realise that this is a matter of incredible importance for them. However, we need to get more information and better information if we are ever going to be able to assist them with managing the water system in this country.
Water trading was introduced to enable growers to access water from other entitlement holders, sometimes from other parts of the basin, during times of water shortages and not for overseas speculators to profit off the back of struggling farmers. I note the comment of the previous speaker, the member for Nicholls, a moment ago in respect of the Lower Lakes of South Australia. There was a recent CSIRO report in respect of those lakes that said the lakes were always fresh water lakes, going back as far as our records show. So to constantly try and use the Lower Lakes in South Australia as an excuse for the problems of the Murray-Darling Basin is totally misguided. I would like to think that we might once and for all look to the Basin Plan, after years of work done by members of this parliament, and also external authorities, as it shows the only way that we can manage the water properly for the growers and ensure that they have security, and security at affordable prices, is to have a Murray-Darling Basin Plan that is consistent with the rules that it was framed under. With regard to overseas water ownership, it is only one of the many matters that needs to be addressed.
Thank you to the member for Mayo; thank you for your contributions, Member for Nicholls and Member for Makin. I'm going to strike a partisan note and say that I think I'm the only speaker on this motion who is opposed to it. The reason I'm opposed to it is because the government is already doing all the things that this motion speaks to. But also, I am opposed to it because we play a very dangerous game when we start pointing fingers at foreign investors for problems that we have with schemes that we have established. It is, in manner and form, exactly why we end up with some of the things we end up with in a democracy, where it is more convenient to blame those who are not here, who cannot answer back, who do not have a voice in this debate, for problems that we have largely created ourselves.
The member for Mayo rightly speaks to Australia being one of the driest continents in the world and how we have experienced one of the worst droughts in our history. The government has responded to that. It provided $8 billion in assistance and concessional loans to primary producers. No-one in this country bemoans the fact that we did this at a very important time for primary producers. The nature of that assistance was the Farm Household Allowance and the Rural Financial Counselling Service, which cost Australian taxpayers $65½ million. That was done through the Drought Community Support Initiative. We provided $3,000 payments to farmers, to farm workers, to suppliers, to contractors who were facing hardship due to the drought. We provided $29.9 million for mental health and wellbeing support, two-year interest-free drought loans for farmers, tax relief, the provision of 100 gigalitres of water for fodder production. We released $300 million for the Drought Communities Program extension, redirecting $200 million from round 4 of the Building Better Regions Fund to drought affected communities and, in addition to that, $138.9 million from the Roads to Recovery Program for drought affected communities. In addition, we piloted $7 million for small business support programs, providing two-year interest-free loans for agriculture dependent small businesses. We provided $15 million support for schools and early childcare centres and we funded $15 million for Tackling Tough Times Together grants.
It was right and appropriate that we do this, but how many other businesses in Australia get that sort of support? How many times have Australian taxpayers stood up for people like that? The people in my electorate, in my part of Sydney, when the dollar drops by 50 cents and their cost of production goes up 100 per cent, don't get that sort of support. When they find they can't get raw materials because some foreign government has decided to close their ports, the Australian taxpayer and the Australian government doesn't step in to assist them in the same way that this parliament time and time again steps in to help Australian farmers. We included a $5 billion Future Drought Fund so this doesn't have to go on again and again and again.
These water rights are incredibly important. They were started by the Howard government, they were supported by the then Labor government, but no-one in this debate has yet spoken about the waste and mismanagement of our water resources in Australia by local councils. No-one stands here in this parliament and holds them to account. How many times have we seen, in particular in regional and rural New South Wales, that the person who throws the chlorine tablets into the Olympic pool is also the same person in charge of managing the water resources for a local town? Australians, especially those in rural and regional areas, deserve better. We must demand better for them. We talk about waste of water, but no-one wants to talk about the environmental flows that have led to the Lower Lakes that have seen 800 gigalitres evaporate, as the member for Nicholls pointed out. That sort of waste and mismanage is okay, apparently, because we put 'environment' in the front of it. But, no, no, it is far easier to blame foreign investors.
As the birthplace of the Murray River and the home of the Victorian Alps, Indi holds a special place in the story of the Murray-Darling Basin. The Murray, Mitta, Kiewa, Ovens, King, Broken and Goulburn catchments of Indi supply approximately 50 per cent of the surface water to the whole Murray-Darling Basin. As well as some smaller dams, Indi contains the Murray-Darling Basin's largest water storages of Dartmouth and Hume dams and Lake Eildon, which amount to 63 per cent of storage capacity in the southern basin and 45 per cent of total storage for the whole Murray-Darling Basin. Indi, therefore, has a significant interest in the Murray-Darling Basin Plan, which is a critical framework for balancing the needs of agriculture, communities and the environment.
According to the Basin Authority, water trading is a mechanism that is maximising the efficiency of water use and contributes to sustainable water management. When water is allocated to an entitlement holder, they themselves can determine whether they use or sell that allocation, creating an incentive for water to be moved to higher-value uses. Moreover, for the farmers who want to leave the land, their water entitlement is an asset like any other that they can sell. However, we've heard this morning that water trading is far from perfect. Well, most people have said that, with the exception of the member for Mackellar, who speaks to drought support. This motion seeks to remedy one of the very many and complex problems that leads to farmers needing drought support. First, water trading inflates the price of water, driving up costs for farmers. Water is not like shares in a company, where you make a bet, take a risk and get rewarded with a dividend. Whether it's in Sydney, Singapore or Seattle, a company buying water from one farmer to then sell to another farmer for a higher price, in my opinion, is sucking money out of farming communities. When traders add value to the market by making it cheaper or easier for farmers to access water allocations, or by overcoming information or other barriers, fine, but there should be no space for the rent-seekers and ticket-clippers profiteering off drought.
Right now, anyone can buy and sell water in Australia, and 14 per cent of trades are from people who don't own land. We need to make sure this market is delivering for farmers, not corporate investors. The system is extremely complex. Anyone who tries to simplify water is 'simple'. In Victoria alone, there are 17 water-trading zones, with the ability to trade water within and across them, specific to each combination of zones. That means there are 272 different zone-to-zone water trading arrangements in Victoria alone. Unregulated water zones are different again. Meanwhile, moving water across the country requires incredibly sophisticated metering, monitoring and accounting to incorporate loss factors. The recent Keelty review demonstrated some fundamental and unacceptable flaws in the system, including: a failure to consider climate change, which latest projections show could cause a 25 per cent reduction in rainfall in the Ovens-Murray region, which feeds the Murray River; lack of metering in the Northern Basin; and lack of transparency around water ownership. The government clearly recognises this is a serious issue, because last year they announced an ACCC inquiry into water trading, which is set to release its interim report on 30 June.
I support the member for Mayo's motion and, when the government releases its exposure draft of the new foreign investment scheme, I would like to see three things. First, they should subject water purchases to the Foreign Investment Review Board. Water is as essential as land or electricity. It is fundamental to our national interests and it should be treated as such. Second, the government should create a register of ownership for water rights. If there are non-landholders purchasing water in the Basin, that information should be collected so the government can monitor its impact on water availability and prices, and this registry should exist for foreign and domestic water owners alike. Third, the government should hold off on preparing this legislation until the interim report of the ACCC is published. That inquiry received over 100 submissions from stakeholders all over the Basin, and good governance requires that those views be incorporated into any legislative reform into the water trading scheme. I support the member for Mayo's motion and am happy to do so today.
I rise to support this motion and welcome the strengthened role of the Foreign Investment Review Board and the changes to the regulatory framework aimed to address what FIRB has described as 'increasing risks to the national interest'. Of the nearly $4 trillion of foreign investment in our country, more than 20 per cent comes from the United States, more than 10 per cent from each of the United Kingdom and Japan, and a little over five per cent from China. This might surprise some. Foreign investment drives economic growth, creates skilled jobs, improves access to overseas markets and enhances productivity. While acknowledging the value and contribution of foreign investment to our national prosperity, it is important to strike a balance between maintaining an attractive and welcoming environment for foreign capital on the one hand while maintaining community confidence in the foreign investment regime on the other.
The Treasurer has introduced reform to the FIRB, giving the Australian community confidence that there are rules in place that protect the national interests and our nation's critical assets. By extension, it follows that the government should work to ensure that Australian farming communities have confidence that rules are in place to protect our nation's most critical asset: water. In principle, the sale of water rights should be subject to approval by the Foreign Investment Review Board.
Since beginning my term in government, I have been listening to local voices, industry and organisations about the challenges posed by the operation of Australia's water trading markets. There is a widely held view that these markets are exploited by local and foreign speculators, who have played a role in artificial price increases in temporary water prices. I have also heard numerous calls from concerned communities requesting that access to these markets be restricted only to those who have productive use of water. Players without a productive use for water add yet another straw to a diminishing cup, driving up scarcity in the market.
While I support water trade associated with productivity, I am sensitive to the fact that annual croppers trade water in dry years as part of their business model when they cannot sow. There are also retired farmers who rely on water trade as their self-funded retirement system. These complexities need to be acknowledged and managed. The government is listening to community concerns about the water markets and water trading and is working through these complexities. This is why the ACCC was directed to conduct an inquiry into markets for tradeable water rights in the Murray-Darling Basin. To inform their inquiry and recommendations, the ACCC held public hearings in regional towns and communities to hear the views of those engaged in and affected by water markets. One public hearing in Mildura was held in the recent drought at its worst and when the price of temporary water was up to around $900 a megalitre. I know that this was a charged meeting, with many expressing their anger and distress at the operation of the markets. Again, the role played by market speculators and foreign investment in the market were key issues at the hearing. The attendees also lamented the view that their voices were not being heard.
I've been working hard to ensure that irrigators, farmers and concerned community members have the chance to raise their views and experience with me. Recently, I convened a teleconference roundtable discussion with the Minister for Resources, Water and Northern Australia, Keith Pitt, along with stakeholders in the water space, including growers, industry peak bodies and water management authorities. We discussed the issue of water trading, and many of these concerns were expanded on. I was pleased that the minister was able to hear Mallee voices.
I, like many others, eagerly await the findings of the ACCC inquiry into water markets. The ACCC will recommend options to enhance markets for tradeable water rights, including options to enhance their operations, transparency, regulation, competitiveness and efficiency. I understand that it will be prudent for the minister to await the commission's findings before taking action with regard to water markets.
Based on the work I have done with members of the Mallee community, expert water management bodies and Minister Pitt, I'm of the opinion that the sale of water rights should be subject to approval by the Foreign Investment Review Board. This will ensure that Australian farming communities have confidence that rules are in place to protect their livelihoods. We owe it to our farmers, irrigators and drought affected communities to restore confidence in the complex system that governs the management of Australia's water resources. (Time expired)