- Posted By Navin De silva
Australia is 8th largest recipient of foreign direct investments in the world. It is ranked in the top ten list compiled by the UNCTAD (United Nations Conference on Trade and Development) for the 8th consecutive year. It moved forward a rank from 9th position the previous year.
Majority of the foreign investments to Australia are directed to the following sectors;
Mining (around 40%), manufacturing (11.5%), real estate (10.6%) and financial and insurance services (8.4%) and others (29.5%).
Australia has been widely regarded as a safe haven for foreign investments. Following are five reasons why:
- Stable and Resilient Economy
Australia is a triple-A rated economy by all three major credit agencies in the world (Moody's, S&P and Fitch). Moody's has rated it AAA with a stable outlook noting strong economic growth, institutions, economic diversity and flexibility.
Australia is the 13th largest economy in the world. Its estimated nominal GDP is USD 1.3 trillion which is around 1.7% of the global economy. According to the CEBR (Centre for Economics and Business Research) it is forecast to become the 11th largest economy by 2026. Increasing population due to inward migration as well as accelerated investment in urban infrastructure will be determining factors of the growth.
One of the most stable and resilient economies in the world today, Australia is in its 27th consecutive year of economic growth. The economy is growing at a rate of 3.4% through the year which is the fastest growth rate since 2012’s mining investment boom.
Australia has maintained an average annual growth of 3 percent since 1992. It is the only major developed economy in the world to have consecutive growth during this period with no recorded recessions. Stability and resilience in the economy is supported by Australia's sound macroeconomic policies, solid trade agreements, a strong services sector as well as a developed ability to respond swiftly to global changes.
- Favourable Political and Business Environment
Australia's stable political environment, its good governance and transparent regulatory framework make it a very attractive investment destination. Australia has an unchanged corporate tax rate of 30% for 17 consecutive years.
Changes in the government and political scenario have not had any drastic impact on foreign investment policies. Most government policies do not interfere with investment as all successive regimes encourage foreign investment. In fact, in 2017 some amendments were introduced to reduce red tape and simplify the investment process and the fee framework for foreign investors (Foreign Investment Review Board Annual report 2015).
According to the Index of Economic Freedom, Australia is ranked the 5th freest economy in the world and the 4th in the Asia Pacific region, with an economic freedom score of 80.9. The governmental integrity and governmental spending indicators scored highly in the assessment of the index.
The Index states that Australia has a strong free market that is underpinned by a competent government and legal system as well as an independent bureaucratic system.
It further quotes that “Australia continues to be an attractive and dynamic investment destination, with almost all industries open to foreign competition and a skilled workforce readily available.”
- Quality of Life
Another important factor that makes Australia an attractive investment destination is its quality of life. Best Countries 2018 report based on factors from quality of life, opportunities and economic potential was compiled by the Y & R’s BAV Group and Wharton School of the University of Pennsylvania. Australia is ranked 5th in terms of Quality of Life and overall 7th Best Country. It is also one of the top 10 countries in terms of education and places to travel alone.
The Quality of Life ranking is based on weighted average of scores of nine indicators. These are attributes of a country that signify or relate to its quality of life. They are affordability, good job market, economic stability, family friendly, income equality, political stability, safety, well developed education and public health system. This component of the ranking contributed to 17% of the overall Best Country position.
Australia's strategic location make it an ideal base for foreign investment and trade. There is proximity to high growth markets in the Asia Pacific region which comprise the majority of its export markets. Its location also allows for many international trading agreements. Currently Australia has seven free trading agreements with nine others in the pipeline. It also benefits from time zone differences, where Australia bridges major world time zones. Global companies can also benefit from time zone differences. Australia bridges major world time zones providing them with 24 hour access.
Australia has one of the most educated and skilled workforces in the world. The workforce is highly skilled due to the exceptional education system and specialised training services.
Over 40% of its workforce has received tertiary education.
The workforce is equipped with skills pertinent to service a diverse range of industries and business sectors. They are especially known for its skills in the finance sector. Almost 80% of the workforce is employed in the services sector including financial and insurance services, healthcare, education and training and information media and telecommunications.
Australia has a multicultural population, where a significant proportion’s native language is an Asian or European language. Nearly 30% of Australia's workforce were born overseas. It is one of the largest multilingual and multicultural workforces in the world.
Author: Navin De Silva | Managing Director | Grit Property Group