Key Points: Appetite for investment in Australia is strong, with inward
FDI increasing by an average of 5.8% over the last five
Australia may just about have it all. Not only does
Australia's land abound with nature's gifts, it can boast
of making its investors the most real money over
the last 111 years. According to London Business School, between
1900 and the end of last year, shares "down under" have
returned their owners a real return of 7.4% each year. Is it of
little wonder that Australia has been named as one of the top
destinations for global investors?
Ranked in the ten most attractive locations for Foreign Direct
Investment (FDI), inward FDI has
increased by an average of 5.8% over the last five years, and at
last count inward stock was calculated at $436 billion. FDI is
generally regarded as amongst the most stable forms of capital
inflow because it involves a substantial commitment from investors
in acquiring business facilities and creating employment and
therefore brings increased competitiveness strengthening the
economy further. For developed economies, the average ratio of FDI to
GDP is 25%. Australia's is 36%. Pretty impressive.
Australia is certainly unique. Developed economies around the
world confronted the most challenging global financial and economic
conditions in 75 years. During the worst of the crisis,
Australia's economy grew by 1.0%. With low levels of debt, a
buoyant labour market, business and consumer confidence high,
Australia's economic growth has continued to outperform.
Predicted to grow to 3%, the robust nature of Australia's
economy represents a safe haven for foreign investors.
Priding itself on a solid, open and progressive regulatory
environment, the Foreign Investment Review Board (the
FIRB) examines proposals by foreign persons to
invest in Australia and makes recommendations to the Treasurer on
those subject to the Foreign Acquisitions and Takeovers Act 1975
and Australia's foreign investment policy. Amounting to almost
$39.1 billion, the United States of America was the largest source
country for foreign investment proposals in 2009-10. Almost a
quarter of all FDI in Australia comes from the United States of
America. Other major source countries of approved investment in
2009-10 were the United Kingdom ($28.6 billion), China ($16.3
billion), Japan ($6.0 billion) and Switzerland ($5.9
The largest number of foreign investment proposals involve the
purchase of real estate. Foreign entities considering the
acquisition of Australian urban real estate must seek
approval from the FIRB before proceeding with the acquisition,
unless the transaction falls within an exempt category. In 2009-10,
there were 113 approvals to purchase developed commercial real
estate (shopping centres, office buildings and warehouses), a
marked increase from the 71 approvals in 2008-9. The associated
proposed investment was $8.6 billion which is an increase from the
$5.8 billion proposed investments in 2008-9.
Globally recognised brands have been quick to invest. Australia
has seen the world's twelfth biggest retailer, Costco, open
premises in Melbourne in August 2009. This followed German retailer
Aldi's significant successful entry into the retail market;
after joining the Australian market in 2001 it has opened more
retail stores than both Coles and Woolworths. Apple has invested
into the Australian retail scene in 2008 and has since expanded in
Melbourne and the Gold Coast.
And it is not just retail. Foreign investors' appetite for
Australian real estate has surged with private equity and pension
funds actively targeting offices, industrial and hotels. Stamford
Land Corporation (Singaporean owned) is among the top ten hotel
owners in Australia.
The Australian outlook certainly looks bright. A resilient
economy underpinned by established, stable political governance. An
energy superpower representing the world's biggest supplier of
coal, second biggest supplier of uranium and fifth biggest supplier
of LNG. A country with strong public finances and a sound financial
system proved to be among the most successful in the world. This
foreign love affair shows no signs of abating any time soon.
An actuarial review of the Invensys Australia Superannuation Fund showed it to be in surplus to the tune of $189.2 million. In mid 2003, the Invensys Group proposed to the trustee that the surplus be repatriated to the principal employer in the group.
CIVs will have flow-through status for tax purposes and similar criteria as the MITs, to encourage foreign investment.
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