Australia as an investment destination
Beyond the excellent investment fundamentals of its agriculture sector, there are also a number of macroeconomic factors that Australia an attractive investment destination. This should help to foster further foreign investment inflows and bodes well for the future of the Australian agricultural sector, both in terms of asset values and rates of income.
The Australian economy continues to perform well off the back of 21 consecutive years of uninterrupted growth. In 2008 during the financial crisis Australia was rated as the world’s most resilient economy in the rankings published annually by the Institute for Management Development (IMD).
Annual change in GDP for Australia, the US and the European Union, 2001 to 2010
The outlook for the Australian economy remains buoyant as it continues to benefit from emerging market demand and a substantial pipeline of investment in the natural resources sector. At 3 people per square kilometre, Australia has one of the lowest population densities and highest per capita natural resource reserves of any nation.
With China (population density of 141 people / sqkm), India (population density of 372 people / sqkm) and a number of other emerging markets on its doorstep, Australia is well positioned to take advantage of rising demand from these economies.
Population density of selected Western and emerging market countries, 2011
Australia’s government bonds are rated Aaa by Moody’s and AAA by S&P and Fitch. At US$69,000 per capita, Australia has a higher GDP per capita than any other large economy, its government debt to GDP ratio is lower than any other large Western economy at under 10% (2012 forecast), and it has an unemployment rate of 5.1% (June 2012), also amongst the lowest of any Western economy.
General government net debt as a % of GDP for selected large economies, 2012 forecast
Australia’s banking system is rated as one of the soundest in the world (ranked 4th of 142 countries by the World Economic Forum) and the country is recognised as having a higher quality of life and level of prosperity and economic freedom than almost any other Western economy. Looking forward, Australia has the economic strength and ‘policy bullets’ to enable it to withstand future external shocks better than the great majority of the world’s economies.
Finally, Australia also ranks amongst the most secure countries in the world to own property, having consistently been ranked one of the top three most transparent property markets by the Jones Land LaSalle Global Real Estate Transparency Index (has held position 1, 2 or 3 of over 80 countries in the index since JLL first published the Transparency Index in 2004).
References and data sources:
- International Monetary Fund (IMF), World Economic Outlook Databases, 2012
- World Bank, Economic Policy & External Debt, 2012
- The Australian Trade Commission (Austrade), Benchmark Report and International Data Comparisons, 2012
- Heritage Foundation & Wall Street Journal, Index of Economic Freedom Ranking, 2012
- The 2011 Legatum Prosperity Index Rankings, 2011
- World Economic Forum (WEF), Global Competitiveness Report, 2011-12
- Institute for Management Development (IMD), World Competitiveness Yearbook, 2012
- Jones Lang LaSalle (JLL), Global Real Estate Transparency Index, 2012
Farming is like any other business: all other things being equal, income is dictated by the quality of the management team. Even enterprises with similar soil, climate and business model can show a high degree of variance. This means tenant / manager selection is a critical component of the agricultural investment process.
Inefficiencies in the farmland pricing mechanism are one of least exploited opportunities to increase returns as a farmland investor. When it comes to buying agricultural assets, we are able to help our clients beat the market because of our unconventional approach to acquiring farms and the information advantage we have in the markets in which we specialise.
Investing in Australian agriculture
Australia’s robust economy, strategic location and investment friendly business environment have made the country one of the world’s top destinations for foreign investment, with FDI inflows of over twice the OECD average (% of GDP basis, 2011).
Geographic and sector focus
For investors, the choice of agricultural sector will be driven by your risk tolerance and overall investment objectives. As a general rule, arable agriculture (i.e. the cultivation of annual crops, in particular grain) is the least volatile farming sector.