The importance of foreign investment in Australia cannot be overstated given it accounts for about 4% of GDP. It is arguably not surprising given Australia is the only country in the developed world to have achieved 27 years of uninterrupted economic growth.
In addition to the financial contribution to our standard of living, it brings new business practices, technologies and expertise and a healthier competitive environment which all contribute to a more vibrant economy. Broader still, it is representative of our nation’s identity in terms of its values of openness and pluralism, all of which echo our approach at One Investment.
While we frequently complain of regulatory hurdles, the robustness of the current framework provides a welcome and comforting environment of stability, certainty and transparency, which are the hallmarks of an environment based on strong investment performance and lower risk.
On 18 June 2018, Austrade released a media statement extolling the findings of the Foreign Investment Review Boards (FIRB) 2016-17 Annual Report (which was released on 18 May 2018).
Key take-outs highlighted by Austrade were:
- Australia continues to be an attractive destination for foreign investment, with China and the US the top two sources of approved investment.
- Chinese investors were the largest source of foreign investment approvals by both value (A$38.9 billion) and number (9,714). The US was the second largest source of approvals by value, with A$26.5 billion worth of approved applications. Canada is growing as an important source of investment with A$23.2 billion worth of approvals in 2016–17, an increase of A$7.5 billion from 2015–16.
- In total, FIRB approved A$168 billion worth of business-related foreign investment proposals in 2016–17, 4% below the previous year.
- Major business-related investment focused on ports and electricity network assets, continuing the trend of acquisitions in these sectors in recent years. Data centres are an emerging area of interest for investors.
- Real estate approvals fell from 40,149 in 2015–16 to 13,198 in 2016–17. FIRB states that the most significant factor explaining this drop was the introduction of application fees in December 2015, which resulted in investors only applying for properties they intended to purchase. The Report notes that this may reflect a reduction in the number of applications rather than necessarily a reduction in actual investment. According to FIRB, other factors that may have contributed to the reduction include tighter Chinese capital controls, weaker market conditions and additional taxes imposed on foreign investor purchases in some Australian states.
- Australian agricultural land recorded a slight reduction in foreign registration from 14.1% to 13.6% in the same period. The UK remains the largest foreign agricultural land holder (2.6% of agricultural land), followed by China (2.5% of agricultural land) and the US (0.7% of agricultural land).
When you combine the above statistics, with the fact that on an aggregate basis the FIRB approved 14,357 investment applications representing $193 billion of proposed investment during the 2016-2017 year, it’s clear Australia is open for business when it comes to investment.
For more detailed information the full FIRB report can be accessed at 2016–17 Annual Report.