A solution to the foreign sale of Australian farms

The emotional and political debate about the sale of Australian agricultural assets, particularly to Chinese interests,   needs a more objective perspective. 

Two types of assets

Cubbie Station - a political football

What is an asset like Cubbie Station?  It's actually two assets. One is the land and resources under the land. The second is the right to produce food or crops from farming. 

This isn't just a technical point, it's critical to the security of Australia and to the debate. 

Separate the assets

A lot of the debate quite rightly surrounds the ownership of large tracts of Australia by foreign owners, especially foreign governments.

There is also acknowledgment that Australia lacks the capital and commitment to farm our arable resources to their full capacity. So, we need to work with foreigners to make productive use of the land.

So, we can lease the asset, rather than sell it. 

The UK model

For centuries, the UK property model has sold long term leaseholds over residential property.  If you "buy" a flat you are most likely buying a 90 year lease, not the freehold. 

We should adopt this model for significant Australian agricultural landholdings. Sell a 100 year lease. It provides food security for the Chinese buyer, but does not relinquish the ultimate ownership of the Australian land. 

Selling long term leases of Australian agricultural properties is a win-win for all. 

Let me know what you think. 

Mark S 

The free market does more good than harm - for proof, see China

After writing a couple of items about the socially liberal half of the blog's title, today's column focuses on the economic rational side.

So, let's start with my main premise - the free market does more good than harm.
And ... The main benefit of the free market is INCENTIVES.

Source: Wikipedia

A quick aside. My academic training is in Psychology. That means I have a good understanding of what makes people behave the way they do. One of the main drivers of behavior is the expectation of a personal reward - we call it positive reinforcement. Positive reinforcement works for people, rats, and every animal in between. If we receive something that we want, in return for doing something, then we will respond, and do it. In most cases, positive reinforcement is more effective than punishment - offering an incentive is more powerful than issuing a threat.

These reinforcements, or incentives, are at the heart of the free market system - it allows personal rewards to be offered to individuals in return for certain behaviors that are valued by others. The incentives inspire action. If I do something that the market wants, I'll get something I value in return. This simple process unlocks many powerful forces - creativity, innovation, design, production, technology, and more.

The free market is often criticised, particularly by those on the economic left of the spectrum. They would favor a system that focuses on the collective rather than the individual. That is, a socialist system. From a social perspective, this is underpinned by the ideal of treating everyone equally within a society. However laudable that goal is, from an economic standpoint, it just doesn't work.

So, to make this point clear, let's look at the most compelling chart that shows the benefit to economic systems that have moved from socialist to free market.

Chart source: Wikipedia

The big one of course is China, and the statistics are compelling. China is now the world's second largest economy - and all of the growth has occurred since the shift to a market economy.

Incentives drive economic activity. By and large, this is a very good thing.


Let me know what you think.


Mark S