Government decisions on deals must send a clear message
The government has blocked the sale to foreign investors of the famous S. Kidman & Co cattle company. It's important that the reasoning behind this decision be transparent and rational. Australia has always been - and will remain - dependent on foreign capital to maximise our economic potential. Despite commentary from Malcolm Turnbull and Scott Morrison, it's not yet possible to exclude pandering to populism as an element in the Kidman decision.
Yesterday the Prime Minister emphasised national security as the reason. One of 10 working cattle stations run by Kidman overlaps with the Woomera weapons testing area of South Australia. Several China-backed syndicates were believed to have been offering up to $370 million for Kidman - at a time of some popular unease about Chinese investment in Australia. Asked about this sentiment, Mr Turnbull said there was "no issue of discrimination" and that China was not the only foreign nation associated with the buyers. 
As for the Treasurer, he cited not only national security but "the size and significance of the total portfolio of Kidman properties". He pointed out that Kidman owned 1.3 per cent of the country's land mass - making it Australia's largest private owner - and 2.5 per cent of our agricultural land with an average herd of 185,000 cattle. The company was founded in 1899 by legendary cattle king Sidney Kidman and remains in family ownership.
It's not the first time Woomera has been cited as a reason to disallow foreign investment. In 2009, then treasurer Wayne Swan blocked the partial sale of OZ Minerals because the company's Prominent Hill mine was in the Woomera Prohibited Area. Woomera is home to defence work of a sensitive nature.
Nor is the Kidman decision the first of recent times that appears to carry a strain of populist xenophobia. In   April 2011, Mr Swan blocked the takeover of the Australian Securities Exchange by the Singapore Exchange on the grounds that Singapore stood to gain more than Australia. He said the decision was a "no-brainer".
Two years ago Joe Hockey as treasurer vetoed a proposal for US agribusiness firm Archer Daniels Midland to buy GrainCorp. Mr Hockey blamed insufficient competition in the sector. At the behest of its Nationals partners, the Abbott government tightened restrictions and threshold limits on foreign purchases of agricultural land. At odds with this trend, the Defence Department this year had no objections to a deal whereby China's Landbridge Group - criticised as a commercial front for the Chinese military and Communist Party - took a 99-year lease over Darwin's port. (Linkages such as Landbridge's are unremarkable in a one-party state, as analyst Linda Jakobson wrote in these pages yesterday.) Taken together, these five decisions do not send a clear message to foreign investors; the trend appears hostile to foreign investment but not predictably so. The picture may become clearer if the Kidman deal is reworked to exclude the Anna Creek station, which Mr Morrison said was substantially within the Woomera Prohibited Area. Both Mr Turnbull and Mr Morrison left open the possibility that a restructured proposal might win approval.
Meanwhile, it's important to put foreign investment into perspective. Liberal Democratic Party senator David Leyonhjelm was on the money yesterday when he said: "I will start worrying about foreign companies buying our farms when I see the farm being loaded on to a ship and taken overseas. The farm can't be taken anywhere, its owner pays tax in Australia, buys supplies in Australia and employs Australians who pay tax in Australia." He believed the Kidman decision reflected unease about Chinese investment and said: "There's an undercurrent of racism to it." There is some hypocrisy, too. The Nationals campaign against selling off the farm while their constituency depends on foreign investment to fatten up the value of its rural properties. A ban on foreign investment in our farms would see their market value plummet. As for food security, in the event that Kidman were sold, Australia would retain more than enough arable land in local ownership to service the domestic market. However, foreign investment will be vital if Australia is to expand exports to cater to Asia's rising middle class. Much of that investment is likely to come from China and other fast-developing countries of the region.The level of Chinese investment at the moment pales into insignificance when compared with the Anglo-American capital that has fuelled the growth of Australia since colonial times. Our pastoral history is sprinkled with the names of famous foreign enterprises such as the Vestey Group, founded two years before the Kidman company by British brothers William and Edmund Vestey. With a vast land mass and a small population, Australia has always drawn on foreign capital for its development - and always will.