A ‘Rule of Thumb’ and the Return on Investment: The role of valuation devices in the financialization of Northern Australian pastoral land

Abstract

Northern Australian pastoral land prices have become higher and more volatile over the last twenty years, raising concerns about the potential implications of the financialization of the industry. These prices are not inevitable results of market forces, but mediated and co-constructed by a range of actors using two valuation devices: the ‘Beast Area Value’, a ‘rule of thumb’ which emerged during the early development of the industry, and the ‘Return on Investment’, a tool widely used to compare financial ventures. The Beast Area Value treats land as a commodity whose value is derived from its physical characteristics, while the Return on Investment treats land as an asset whose value is based on its future income generation potential. This article describes how some pastoral companies are strategically combining these devices to earn capital gains through ‘speculative development’ of properties in ways that do not necessarily increase their productivity. It argues that pastoral land is often developed in ways more reflective of the valuation devices used in the region than of the realities of station management, representing a shift from competing in the sphere of production to competing in the sphere of valuation and implicating these devices in the financialization of Northern Australian land.