Australia - Foreign investment

Total foreign investment in Australia in 1997/98 stood at A $587,231 million (about US $390,098 million at the prevailing exchange rate), according to the Australian Bureau of Statistics (ABS). Two years later, 1999/2000, it had increased 23% to A $722,250 million ( US $479,498 million), after increases of about 8% in 1998/99 and 15% in 1999/2000. In 2000/01, the nominal increase in total foreign investment was 12%, to A $809,377 million, but because of the depreciation in Australian dollar, this constituted a decline of 9.8% in US dollar terms, to US $450.4 billion. Of the total, about 57% is portfolio investment, 26% foreign direct investment (FDI), 2.8% financial derivatives, and 14.3% other investment liabilities. According to figures at June 2000 (the latest available), the United States accounts for the biggest share of total foreign investment, at 30%, including 34% of FDI. The UK is second with 24.8% of total foreign investment, and a 26.5% share of FDI. Countries whose share of FDI in Australia were greater than 2% as of June 2000 are Japan (8.1%), the Netherlands (4.4%), Germany (2.7%), and France (2.6%), all of which had lower total shares than their FDI. For other substantial foreign investors, their share of the total foreign investment—Hong Kong at 3.4%; Singapore at 2.8%, New Zealand at 1.8%, Benelux at 1.3%—exceeded their share of FDI. In all, OECD countries in June 2000 accounted for 88.7% of FDI in Australia, and 73.5% of total foreign investment.

Almost half of total foreign investment, 48.1% as of June 2000, has been in finance and insurance, with investments in manufacturing (13.4%), other industries (11.4%) and mining (8%) making up another third. The most recent focus of foreign investment has been the booming tourist industry, and commercial and residential property development. Hotels and resorts on the north New South Wales and Queensland coasts are attracting capital from abroad, as are large office block and hotel projects in the capital cities.

Australia prefers the inflow of long-term development capital to that of short-term speculative capital. It also welcomes the technical competence usually accompanying foreign investment. Investment incentives include tariff protection, and bounties for the manufacture of certain products. Total foreign ownership is permitted, but ownership in certain sectors is subject to restrictions. In April 2001 the government rejected Royal Dutch/Shell's $10 billion. bid for Woodside Petroleum, Australia's largest-listed oil and gas company, causing some concern that it was retreating from its liberalization policies. The Federal Department of the Treasury regulates foreign investment with the assistance of the Foreign Investment Review Board (FIRB), which screens for conformity with Australian law and policy. The major legislation governing foreign investment is the Foreign Acquisitions and Takeovers Act of 1975, as amended in 1989, and administered according to regulations issued in 1991, as the country was embarking on its program of economic liberalization. Across the period, foreign investment has risen from below 2% of GDP to over 9%. It is estimated that about 34% of shares traded on the Australian stock exchange are foreign owned.

The IMF estimates that Australia's outward investments have exceeded inward investments by a small amount since 1999/2000 and 2000/01, when net capital outflows amounted to -0.2% of GDP for both years. The preliminary estimate for 2001/02 is net capital flows amounting to -0.1 of GDP.