1.1
Agricultural commodities provide approximately $60 billion annually to the Australian economy, making the sector a major economic contributor.
1.2
According to Industry Super Australia (ISA), the sector has the potential to be even bigger, but will require ‘significant and patient financial backing’. The sector offers ‘a variety of investment opportunities with products that are highly valued by domestic and global consumers.
1.3
Mr Ed Peter, Group Chairman of Duxton Asset Management, explained the benefit of investing in agriculture over other assets like energy, metals and mining, is that agriculture ‘is a gift that keeps on giving’:
With both energy and metals and mining, once I dig it out, it’s gone. [Agriculture] is a gift that keeps on giving. As long as I husband my land, I will get a return every year.
1.4
The appeal of Australian agriculture is our country’s size and ‘variety of climatic zones’ that enable producers to offer a diverse range of commodities. For example, food products range from ‘annual and permanent crops, livestock and various animal and insect products, including everything from mushroom growing to beekeeping’. Additionally, Australia’s geographical proximity to Asia and its growing middle-class provides access to exportation opportunities for such commodities.
1.5
Given the current stable base of agricultural product, and its growing appeal in neighbouring markets, the attractiveness of investment in agriculture sector interests would appear logical, especially from the significant capital available from superannuation funds within Australia itself.
1.6
However, there is a lack of superannuation fund investment in the industry due to:
complex foreign investment rules;
fund manager inexperience;
volatility of the commodities market; and
an absence of sector performance data.
1.7
Both the Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA)—regulator of the financial services industry and enforcer of prudential standards across the superannuation industry respectively—indicate that no specific regulatory or legislative barriers to agricultural investment exist within their remits.
1.8
Despite this, industry analysis suggests that Australian superannuation funds ‘only [hold] a very small portion of farm assets in Australia’.
1.9
However, superannuation funds are interested in agriculture. ISA notes that ‘Australian based managed funds…have invested or committed over $2.3 billion’ in the sector, with industry superannuation funds investing $1.6 billion in agricultural assets since 2017.
1.10
According to the National Farmers’ Federation (NFF), Australian farmers export approximately 67 per cent of their produce, but further investment is needed to build efficiency and competitiveness.
1.11
The Consolidated Pastoral Company (CPC) too believes a crucial element to ‘Australian agriculture realising its potential is access to capital’. CPC cites research that estimates a capital investment of $600 billion is required in Australian agriculture from now until 2050 to support production growth. Noting that the superannuation industry holds $2.6 trillion on behalf of its members, the CPC says the sector needs to be able to entice investment from this source of substantial capital.
1.12
Initiatives that grow overall agricultural business profitability, and knowledge and experience in the sector, will see increased capital investment from varied sources, including superannuation funds.
About this inquiry
1.13
This inquiry was initiated when, on 24 May 2018, the then Treasurer, Hon Scott Morrison MP, asked the Committee to inquire and report on whether:
there are any regulatory requirements imposed on superannuation funds by ASIC, APRA and any other relevant regulators, which are acting as a barrier to superannuation fund investment in Australian agriculture;
the information required by the superannuation funds in order to invest in Australian agriculture is readily available, and if not, what statistical performance reporting of the agricultural sector is necessary; and
there are any other practical barriers to superannuation fund investment in Australian agriculture.
1.14
The Committee received 21 submissions and three supplementary submissions, and held eight public hearings. Details of these are included at appendices A (submissions) and B (public hearings) of this report.
1.15
This report discusses some of the barriers—regulatory and otherwise—that have to date limited superannuation fund investment in agriculture. The focus throughout is on practical actions the Australian Government can take to remove these barriers and encourage further investment. Recognising that all investments carry some level of risk, only those specific to agriculture will be considered.
1.16
The report consists of three chapters: