Australia

Bureau of Economic and Business Affairs
July 5, 2016

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Executive SummaryShare    

Australia is generally welcoming to foreign investment and such investment is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is the dominant source of FDI in Australia and U.S. direct investment totaled USD180.3 billion in 2014, an increase of 6.1 percent from 2013. In 2014, 38 percent of Australia’s total FDI was in the resources sector.

Australia has a well-established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute processes. The country is recognized internationally as a leader in the development and provision of non-court dispute resolution mechanisms, and is a signatory to all the major international dispute resolution conventions. There are few disputes that involve foreign investors.

Australia has an AAA international credit rating with a well-developed, deep and sophisticated financial market, regulated in accordance with international norms.

The Australian government supports the negotiation of comprehensive Free Trade Agreements (FTAs) that are consistent with the World Trade Organization investment rules and guidelines and which complement and reinforce the multilateral trading system. Australia’s FTAs contain chapters on investment. The Australia-U.S. FTA (AUSFTA) establishes a dispute settlement mechanism for investment disputes arising under the Agreement. However, AUSFTA does not contain an investor-state dispute settlement (ISDS) mechanism that would allow individual investors to bring a case against the Australian government. Australia is one of 12 members in the Trans Pacific Partnership (TPP), which does include ISDS provisions.

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB), a division of Australia’s Treasury, is a non-statutory body established to advise the Treasurer and the Commonwealth Government on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB, the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. Following a number of recent investments made by foreign companies in key sectors of Australia’s economy, the laws and regulations governing foreign direct investment have been subject to a wide ranging and on-going review.

Table 1

Measure

Year

Index or Rank

Website Address

TI Corruption Perceptions index

2015

13 of 175

transparency.org/cpi2014/results

World Bank’s Doing Business Report “Ease of Doing Business”

2016

13 of 189

doingbusiness.org/rankings

Global Innovation Index

2015

17 of 143

globalinnovationindex.org/content/page/data-analysis

U.S. FDI in partner country ($M USD, stock positions)

2014

USD 180.3 trillion

BEA

World Bank GNI per capita

2014

USD 64,540

data.worldbank.org/indicator/NY.GNP.PCAP.CD

 

1. Openness To, and Restrictions Upon, Foreign InvestmentShare    

Attitude toward Foreign Direct Investment

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. FDI, which accounts for around one-quarter of Australia’s total foreign investment, reached USD565 billion in 2014. The United States remains the dominant source of FDI in Australia and U.S. direct investment in Australia totaled USD180.3 billion in 2014, an increase of 6.1 percent from 2013. In 2014, 38 percent of Australia’s total FDI was in the resources sector.

Australia remained one of the top 15 destinations for global FDI in 2014, with a 2.2 percent share of the global stock of FDI. Total inbound stock of FDI as a percentage of Australian GDP reached 39 per cent, supported by ongoing economic expansion and integration with trading partners, particularly in the Asian region. Recently completed free trade agreements with Japan, South Korea, and China, and Australia’s participation in the Trans-Pacific Partnership Agreement, are intended to increase prospects for greater two-way investment between Australia and its trading partners.

Under the auspices of the Australia-United States Free Trade Agreement (AUSFTA), which came into effect on January 1, 2005, all U.S. greenfield investments are exempt from FIRB screening. AUSFTA also raised the threshold for screening most U.S. acquisition investments in Australia. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above AUD 1.094 billion (USD791.6 million). All foreign persons, including U.S. investors, must notify the Australian government and receive prior approval to make investments of five percent or more in the media sector, regardless of the value of the investment.

While there are no laws or practices that U.S. investors allege discriminate against foreign investment, the Australian Treasurer intervened in November 2013 to block U.S. agribusiness Archer Daniels Midland’s (ADM) proposed AUD 3.4 billion acquisition of Australian company GrainCorp Limited. The Treasurer determined that allowing a takeover to proceed could risk undermining public support for the foreign investment regime and ongoing foreign investment more generally, and that the ADM investment into Australia therefore would not be in the national interest.

Other Investment Policy Reviews

Australia has not conducted an investment policy review (IPR) in the last three years through either the OECD or UNCTAD system. A seventh WTO review of the trade policies and practices of Australia did take place however, in April 2015, and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp412_e.htm Members of the review commended Australia's commitment to the development and reinforcement of the rules-based multilateral trading system as well as for its coordinating and guiding role in several trade and investment liberalization activities within and outside the WTO (e.g. Information Technology Agreement, Environmental Goods Agreement, and Trade in Services Agreement). See concluding remarks by the Chair at https://www.wto.org/english/tratop_e/tpr_e/tp412_crc_e.htm

The Australian Trade Commission compiles an annual ‘Why Australia Benchmark Report’ that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report.

Laws/Regulations on Foreign Direct Investment

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB), a division of Australia’s Treasury, is a non-statutory body established to advise the Treasurer and the Commonwealth Government on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB, the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. Following a number of recent investments made by foreign companies in key sectors of Australia’s economy, the laws and regulations governing foreign direct investment have been subject to a wide ranging and ongoing review.

In December 2015, the Government enhanced the enforcement of rules governing foreign investment in Australia and introduced a ‘national interest’ consideration in reviewing foreign investment applications. Changes made in the Government’s Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015 provide for greater compliance powers to the Australian Taxation Office (ATO) and introduced strict new penalties for investors circumventing foreign investment rules. The Government also introduced a new agricultural land foreign ownership register to understand the nature of foreign ownership of Australian land. From July 1, 2015, the ATO began collecting information on the location and size of property and size of interest acquired on new foreign investment in agricultural land. The register will be expanded to include residential real estate in 2016. Lower screening thresholds for agricultural land and agribusiness will also mean that more agricultural investment is screened by the FIRB.

In February 2016, the Government announced its intent to implement a national register of foreign ownership of water access entitlements, which is intended to enhance transparency and assist in informing the Government and the community about emerging investment trends. The Government also announced new requirements on foreign investment applications to ensure that multinational companies investing in Australia pay tax on what they earn in Australia. In March 2016, the Government announced that it would amend the Foreign Acquisitions and Takeovers Regulation so that the FIRB could assess the potential sale of ‘critical state-owned infrastructure assets’ to private foreign investors. Starting March 31, 2016, the FIRB will formally review critical infrastructure assets sold by State and Territory governments.

Australian Trade Commission (Austrade): https://www.austrade.gov.au/International/Invest/Guide-to-investing/Investing-in-Australia

The Australian Trade Commission Web site presents information on Australia’s investment framework, investor obligations and approval processes, as well as details of international offices, events, Austrade services and investment publications.

Foreign Investment Review Board: http://firb.gov.au/

FIRB is the body that advises the Treasurer and the Government on Australia’s Foreign Investment Policy and its administration. FIRB annual reports provide information on the operation of Australia’s foreign investment review arrangements. The Web site also announces key legislative developments and modifications to Australia’s foreign investment policy as well as deliberations made by the Treasurer on investment applications.

Business Registration

Business registration in Australia is relatively straightforward and is facilitated through a number of Government Web sites. The Commonwealth Department of Industry, Innovation and Science’s business.gov.au provides an online resource and is intended as a ‘whole-of-government’ service providing essential information on planning, starting and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets and financial services regulator, the ASIC Web site provides information and guides on starting and managing a business or company.

In registering a business, individuals and entities are required to register as a company with the ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank ‘Starting a Business’ indicator, registering a business in Australia takes 2.5 days.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national ‘gateway’ agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Chicago, Houston, New York, San Francisco, and Washington, DC.

A number of Australian state investment promotion agencies also support international investment at the state level and in key sectors. Investment Attraction South Australia aims to drive inward investment for South Australia while Invest in New South Wales similarly seeks to promote New South Wales as an investment location.

‘Small business’ is defined differently by regulators in Australia depending on the laws they administer. ASIC regulates 'small proprietary companies’ which it defines as a company with two out of following characteristics:

  • An annual revenue of less than AUS$25 million;
  • Fewer than 50 employees at the end of the financial year; and,
  • Consolidated gross assets of less than AUS$12.5 million at the end of the financial year.

The Australian Taxation Office defines a small business as one that has annual revenue turnover of less than AUS$2 million, while Fair Work Australia defines a small business as one that has less than 15 employees. Despite these differences, many regulators adopt the definition of ‘small business’ used by the Australian Bureau of Statistics, which is a business that employs fewer than 20 people.

Industrial Promotion

Austrade promotes investment in five key sectors that have been jointly agreed by Australian and State and Territory Governments. These include agribusiness and food; major infrastructure; tourism infrastructure; resources and energy; and advanced manufacturing, services and technology. Within advanced manufacturing, services and technology, Austrade focuses on highlighting growth opportunities for investment in Australian medical and materials sciences and technologies, and digital technologies. Further details and investment opportunities in these sectors are listed on the Austrade Web site.

Limits on Foreign Control and Right to Private Ownership and Establishment

Within Australia, the right exists for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity in accordance with national legislative and regulatory practices.

In addition to the activities of the FIRB, there are a number of initiatives that impact foreign investments in Australian agricultural land. The Government revised its scrutiny of foreign purchases of agricultural land by reducing the monetary screening threshold it applies to foreign investment acquisitions. Effective from March 1, 2015, the Government reduced the screening threshold from AUD 252 million to AUD 15 million (USD182 to 10.8 million). This threshold will apply to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. The reduced screening threshold does not affect investments made under the Australia-U.S. Free Trade Agreement. The current threshold remains AUD 1.094 billion (USD791.6 million) for U.S. non-government investors. Future investments made by U.S. non-government investors will be subject to inclusion on the proposed foreign ownership register of agricultural land and will also be subject to Australian Tax Office (ATO) information gathering activities on new foreign investment. Since July 1, 2015, the ATO has collected information on all new foreign investment in agricultural land, regardless of value, and will commence a stock-take of existing agricultural land ownership by foreign interests.

Privatization Program

Australia does not have a formal and explicit national privatization program. A central plank underpinning the Coalition Government’s policy framework is to address Australia’s fiscal imbalance with the intent by government to return Australia’s budget to surplus. A key feature of this approach is an Asset Recycling Initiative, an initiative offering financial incentives to Australia’s States and Territory Government’s to privatize government-owned assets and reinvest the returns into new, productivity-enhancing infrastructure. Launched in mid-2014 with a five year timeframe, the Asset Recycling Initiative is the focus of considerable national and state-level political scrutiny. To date, a number of state-level initiatives have been proposed and are currently being developed. Ports and electricity transmission facilities are key sectors being considered for asset disposal. Foreign investors are welcome to participate in this program.

Screening of FDI

See Laws/Regulations on Foreign Direct Investment above.

Competition Law

The Australian Competition and Consumer Commission (ACCC), an independent Commonwealth statutory authority whose role is to enforce the Competition and Consumer Act 2010 and a range of additional legislation, promotes competition and fair trading and regulates national infrastructure. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. ACCC also engages in consumer protection enforcement.

2. Conversion and Transfer PoliciesShare    

Foreign Exchange

The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the currency, has the authority to implement exchange controls, although there are currently none in place.

The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay.

Remittance Policies

Australia does not engage in currency manipulation tactics.

Australia is a founding member of the Financial Action Task Force (FATF), and the Australian Government’s Attorney-General’s Department heads the delegation for Australia at all FATF meetings.

In April 2015, FATF concluded an assessment of Australia’s anti-money laundering and counter-terrorist financing (AML/CFT) system. The assessment noted that Australia had a good understanding of its money laundering risks, coordinated domestically to address these risks, and had highly effective mechanisms for international cooperation. However, the authorities focus more on the disruption of predicate crimes, rather than on the laundering of the proceeds of these crimes and their confiscation. While the report recognized that Australia develops good quality financial intelligence which it shares with law enforcement bodies and other authorities, the report concluded that this information should lead to more ML/TF investigations.

Australia is also a member and permanent co-chair of the Asia/Pacific Group (APG) on Money Laundering, a FATF-style regional body hosted by the Australian Federal Police (AFP) in Sydney.

3. Expropriation and CompensationShare    

The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Private property can be expropriated for public purposes in accordance with established principles of international law. Due process rights are well-established and respected, and prompt, adequate and effective compensation takes place.

4. Dispute SettlementShare    

Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts

Australia has an established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute resolutions. Australia is a leader in the development and provision of non-court dispute resolution mechanisms. It is a signatory to all the major international dispute resolution conventions and has organizations that provide international dispute resolution processes.

Property and contractual rights are enforced through the Australian court system, which is based on English Common Law. There are few investment disputes involving foreign companies. Australia is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention). The AUSFTA establishes a dispute settlement mechanism for disputes arising under the Agreement. In the first instance, disputes are to be settled through consultation between the parties. Where these consultations are not effective in resolving the dispute, the Agreement provides for an arbitral panel to consider the matter.

The dispute settlement mechanism provides for compensation for breaches of the agreement, which may include requiring the breach to be corrected, trade compensation to be provided, or monetary compensation in lieu of trade compensation. The AUSFTA does not allow private investors to directly challenge government decisions, but individual investors are able to raise concerns about their treatment by the Australian government with the U.S. government.

Bankruptcy

Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s States and Territories. Only individuals can be made bankrupt and not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Act though similar provisions (called administration and winding up) exist under the Corporations Act 2001.

The Bankruptcy Act established the roles of Inspector-General in Bankruptcy and Official Receiver and Official Trustee in Bankruptcy, and the Australian Financial Security Authority (AFSA) oversees each of these roles. The relevant courts covering bankruptcy are the Federal Court of Australia, General Division, and the Federal Circuit Court. Creditors can apply to the court to make an individual bankrupt if they can satisfy the court that a debtor owes them money; however, when an individual enters bankruptcy, this limits the rights of unsecured creditors to recover their debts directly from the debtor.

Investment Disputes

In 2010, an Australian company with approximately 30 percent U.S. institutional investor ownership acquired an Australian mining company for the purpose of obtaining the latter company’s primary asset, a coal exploration license. The New South Wales (NSW) government had legally approved the purchase. Subsequent to the purchase, however, the NSW Independent Commission Against Corruption (ICAC), a non-judicial anti-corruption entity with sweeping powers of investigation but no independent powers to prosecute, determined that the original Australian company had corruptly obtained the license. Based on the ICAC findings, the NSW government passed legislation and cancelled the license. The legislation also prevents the NSW government from having any liability for its past conduct. The result of these actions is the investors of the acquiring company, including the U.S. investors, have lost their entire investment.

International Arbitration

Please reference Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts.

ICSID Convention and New York Convention

Please reference Legal System, Specialized Courts, Judicial Independence, Judgments of Foreign Courts.

Duration of Dispute Resolution – Local Courts

Information not available.

5. Performance Requirements and Investment IncentivesShare    

WTO/TRIMS

Australia has been a World Trade Organization member since 1995 and does not have any measures that are inconsistent with Trade Related Investment Measures (TRIMS).

Investment Incentives

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and Territory Governments similarly offer a suite of financial and non-financial incentives. Australian and State and Territory Governments provide selected grants to businesses for establishing or expanding a business, or for specific activities such as research. The Commonwealth Government also provides incentives for companies engaging in research and development (R&D), and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by AusIndustry (Government agency) and the Australian Taxation Office (ATO).

Research and Development

U.S. firms and R&D entities are eligible to participate in Government-financed research and development programs.

Performance Requirements

As a general rule, foreign firms establishing themselves in Australia are not subject to performance requirements and incentives.

Data Storage

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to retain and secure, for two years, telecommunications data (not including content); to protect retained data through encryption; and to prevent unauthorized interference and access. The Bill limits the range of agencies that are able to access telecommunications data and stored communications, establishes a “journalist information warrants regime.”

6. Protection of Property RightsShare    

Real Property

A strong rule of law protects property rights in Australia and operates against corruption.

Intellectual Property Rights

Australia generally provides strong intellectual property rights (IPR) protection and enforcement through legislation that, among other things, criminalizes copyright piracy and trademark counterfeiting. Under the AUSFTA, Australia must notify the holder of a pharmaceutical patent of a request for marketing approval by a third party for a product claimed by that patent. U.S. and Australian pharmaceutical companies have raised concerns that unnecessary delays in this notification process restrict their options for action against third parties that would infringe their patents if granted marketing approval by the Australian Therapeutic Goods Administration.

In April 2013, the Intellectual Property Laws Act was amended under the Raising the Bar Act which raised the quality of granted patents closer to international standards and gave innovators more certainty when applying in Australia and other jurisdictions. It also introduced improved mechanisms for trademark and copyright enforcement, and greater penalties for trademark infringement, bringing them into line with penalties for copyright infringement.

The Raising the Bar Act also improved border enforcement measures by addressing the importation of counterfeit goods. The amendments, driven by IP Australia, simplified the customs seizure process and benefited brand owners by allowing more information to be released to the rights owner on the source of the goods as well as the importer.

Import provisions allow the Australian Customs and Border Protection Service to seize goods that infringe trademarks and copyright and which are covered by a valid Notice of Objection. A notice of objection can be lodged by a rights owner with Customs, together with a security deed of undertaking. The security deed is in place so that the trademark or copyright owner will pay the costs associated with seizing, storing and destroying goods.

Australia was an active participant in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations and signed ACTA in October 2011. It has not yet ratified the agreement. ACTA would establish an international framework to assist Parties in their efforts to effectively combat the infringement of intellectual property rights, in particular the proliferation of counterfeiting and piracy.

The Australian Parliament passed the Intellectual Property Laws Amendment Bill 2014 on February 9, 2015. The Bill amends the Patents Act 1990, Trade Marks Act 1995, Designs Act 2003, and the Plant Breeder's Rights Act 1994, and introduces a number of changes to Australia’s IP regime. It implements the Protocol amending the WTO Agreement on Trade-Related Aspects of Intellectual Property, enabling Australian medicine producers to manufacture and export patented pharmaceuticals to countries experiencing health crises, under a compulsory license from the Federal Court. It extends the jurisdiction of the former Federal Magistrates Court, the Federal Circuit Court, to include plant breeders’ rights matters. Significantly, it allows for a single trans-Tasman patent attorney regime and single patent application and examination processes for Australia and New Zealand as part of a broader Single Economic Market agenda.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/.

Resources for Rights Holders

Contact at Mission:
Michael Roberts
Deputy Economic Counselor
61 2 6214 5810
robertsmr@state.gov

Country resources:
Local attorneys list: http://canberra.usembassy.gov/lawyers.html

7. Transparency of the Regulatory SystemShare    

The Commonwealth Government utilizes transparent policies and effective laws to foster national competition and develop competition policy, and is highly consultative in its policy making process. Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board, an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001, and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Commonwealth Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.

Australia subscribes to the 1976 declaration of the OECD concerning International Investment and Multinational Enterprises. The instruments cover national treatment and investment incentives and disincentives, and spell out voluntary guidelines for the conduct of multinational enterprises in member countries. Australia also subscribes to two OECD codes of liberalization, one covering capital movements and the other invisible transactions.

8. Efficient Capital Markets and Portfolio InvestmentShare    

Australian capital markets are generally efficient and are able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms do face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity and smaller firms more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, particularly when compared to the government bond market, though this is showing signs of steady expansion.

Money and Banking System, Hostile Takeovers

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance. In the domestic loan portfolio of Australian banks, the ratio of non-performing assets to total loans was 0.9 per cent at June 2015, down from a peak of 1.9 per cent in mid-2010. Funding costs have declined modestly as competition in domestic deposit markets has eased, and Australia’s banks have continued to accumulate capital over recent quarters. Australia’s banks appear well placed to adjust to any further increases in capital targets. From the beginning of 2015, Australian banks have been implementing the Liquidity Coverage Ratio requirement, and new liquidity rules have reinforced the need for Australia’s banks to manage their liquidity risks effectively.

9. Competition from State-Owned EnterprisesShare    

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is government business enterprise (GBE), and a number of major GBEs operate at the national and state level; Australia has, however, steadily privatized most of its SOEs and few remain. Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises. Australian Commonwealth and state governments have followed policies of privatizing their remaining state-owned assets in areas such as electricity generation, transmission, distribution, and retailing to both domestic and foreign investors.

At the national level, a GBE is a Commonwealth entity or Commonwealth company that is prescribed by Section 8 of the Public Governance, Performance and Accountability Act 2013 (PGPA Act). Section 5 of the PGPA Rule 2014 prescribes seven types of GBEs, these being three corporate Commonwealth entities and four Commonwealth companies. The Australian Government's relationship to its GBEs is similar to the relationship between a holding company and its subsidiaries.

GBEs provide a range of services, including communications, transport, employment and health services. The three characteristics that identify GBEs are that the government controls the body; the body is principally engaged in commercial activities; and the body has a legal personality separate to a department of government. Corporate Commonwealth entities prescribed as a GBE under Section 5(1) of the PGPA Rule 2014 include the Australian Postal Corporation and Defence Housing Australia. Commonwealth companies prescribed as GBEs by Section 5(2) of the PGPA Rule include the ASC Pty Limited, Australian Rail Track Corporation Limited, Moorebank Intermodal Company Limited, and NBN Co Limited.

In June 2015, the Commonwealth Government announced its intent to join the World Trade Organization (WTO) Agreement on Government Procurement (GPA).

OECD Guidelines on Corporate Governance of SOEs

Australian GBEs are governed by the PGPA Act and its rules and guidance, which provide guidance on board and corporate governance, financial governance, and planning and reporting.

Sovereign Wealth Funds

Australia’s sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government and established in 2006 under the Future Fund Act of 2006. Seeded by the Commonwealth Government with AUS$60.5 billion from Budget surpluses and proceeds from the privatization of the nationalized telecommunications company Telstra, the Fund was established to enhance the ability of future Australian Government’s to discharge unfunded superannuation liabilities expected after 2020, when an ageing population is likely to place significant pressures on Government finances. The Future Fund is managed by a Future Fund Management Agency that is responsible for the development of recommendations to the Board of Guardians on the most appropriate investment strategy for each fund and for the implementation of investment strategies. All administrative and operational functions associated with the management of the funds are undertaken by the Agency. As a founding member of the International Forum of Sovereign Wealth Fund (IFSWF), the Future Fund’s structure, governance and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the ‘Santiago principles’).

Since its creation, the Agency has been given responsibility for managing a number of ‘nation-building funds’, a Disability Care Fund, and a Medical Research Future Fund. A Building Australia Fund was established by the Nation-building Funds Act 2008, to enhance the Commonwealth’s ability to make payments in relation to the creation or development of transport, communications, energy, and water infrastructure and in relation to eligible national broadband matters. An Education Investment Fund was established to make payments in relation to the creation or development of higher education infrastructure, research infrastructure, vocational education and training infrastructure, and eligible education infrastructure. A DisablityCare Australia Fund was established by the DisabilityCare Australia Fund Act 2013, the aim being to reimburse States, Territories and the Commonwealth for expenditure incurred in relation to the National Disability Insurance Scheme Act 2013 and to fund implementation of that Act in its initial period of operation. A Medical Research Future Fund was established by the Medical Research Future Fund Act 2015 to provide grants of financial assistance to support medical research and medical innovation.

As of December 31, 2015, the value of the Future Fund totaled AUS$118.4 billion. The value of the Education Investment Fund totaled AUS$3.71 billion; the Building Australia Fund totaled AUS$3.65 billion; the DisabilityCare Australia Fund totaled AUS$4.29 billion, and the Medical Research Future Fund totaled AUS$3.14 billion.

10. Responsible Business ConductShare    

There is general business awareness and promotion of responsible business conduct in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An ANCP Web site links to the ‘OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas’ noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, the Export Finance and Insurance Corporation, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australia does not currently participate in the Extractive Industries Transparency Initiative (EITI). Australia did however, complete an EITI pilot in 2014 and a decision on whether to proceed with implementation of the EITI is expected in early 2016.

Firms that pursue RBC are often rated highly in surveys of corporate behavior. RBC is still, however, an emerging concept and practice, and building institutional awareness and support for RBC remains an ongoing process. There is no formal approach to RBC at the national level. A number of independent NGOs and associations exist to promote and monitor RBC.

11. Political ViolenceShare    

Political protests (e.g., rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

12. CorruptionShare    

Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, or to exporting goods and services to Australia.

Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

In 2015, Australia ranked joint-13th out of 168 countries on Transparency International’s Corruption Perception Index, with a score of 79, down from a 2014 ranking of 11th out of 175 countries with a score of 80. Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery was passed in 1999. Legislation explicitly disallowing tax deductions for bribes of foreign officials was enacted in May 2000. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of USD 840,000. For a corporate entity, the maximum penalty is the greatest of either USD 8,403,000, three times the value of the benefits obtained, or 10 percent of the previous 12-month turnover of the company concerned.

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. In 2006, the Commonwealth Government established the Australian Commission for Law Enforcement Integrity (ACLEI), with a mandate to prevent, detect and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

An Independent Commission Against Corruption (ICAC) operates in New South Wales to investigate, expose and minimize corruption in the NSW public sector. Similarly, South Australia’s Independent Commissioner Against Corruption Act 2012 (the ICAC Act) created the Office for Public Integrity and the Independent Commissioner Against Corruption (ICAC). The ICAC Commissioner is tasked with identifying corruption in public administration and investigating and referring for prosecution where appropriate. ICAC’s jurisdiction extends to all South Australian public administration including state and local government agencies and officers, Members of Parliament, members of the judiciary, statutory authorities, and the police.

UN Anticorruption Convention, OECD Convention on Combatting Bribery

Australia has signed and ratified the United Nations Convention against Corruption, and is a signatory to the OECD Anti-Bribery Convention.

Resources to Report Corruption

Corruption and Crime Commission

86 St Georges Terrace
Perth, Western Australia
Tel. (08) 9215 4888
info@ccc.wa.gov.au
Independent Commission against Corruption NSW
Level 7, 255 Elizabeth Street
Sydney NSW 2000
Australia
02 8281 5999 (Australia)
icac@icac.nsw.gov.au

13. Bilateral Investment AgreementsShare    

Australia is a party to bilateral investment treaties with 21 countries, including Argentina, China, Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Laos, Lithuania, Mexico, Pakistan, Papua New Guinea, Peru, Philippines, Poland, Romania, Sri Lanka, Turkey, Uruguay and Vietnam.

Australia has comprehensive Free Trade Agreements (FTAs) with the United States, Thailand, Singapore, Korea, Japan, China, Chile, Malaysia, and a multilateral FTA with New Zealand and the countries of the Association of Southeast Asian States (ASEAN), all of which contain chapters on investment. The countries covered by these FTAs account for 28 percent of total trade. Australia has concluded negotiations on an FTA with China.

Australia is currently engaged in two bilateral FTA negotiations with India and Indonesia, and four plurilateral FTA negotiations: the Trans-Pacific Partnership Agreement (TPP), the Regional Comprehensive Economic Partnership (RCEP, consisting of the ASEAN + Six group of nations), the Gulf Cooperation Council (GCC), and a Pacific trade and economic agreement (PACER Plus).

Bilateral Taxation Treaties

Australia has a long established tax treaty with the United States. The ‘Convention’ between Australia and the U.S. for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income was signed in 1982. This convention was amended by a 2001 Protocol. The Protocol provides for a number of broad exceptions to the general rate limit of 15 percent for source country taxation on dividends. No tax is chargeable in the ‘source country’ on dividends where a beneficially entitled company resident in the other country holds 80 percent or more of the voting power of the company paying the dividends and satisfies certain conditions, including the public listing requirements under the Limitation on Benefits Article. A limit of 5 percent applies for other company shareholdings of 10 percent or greater.

On April 28, 2014, Australia signed an Intergovernmental Agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA) and improve tax cooperation. Under FATCA, Australian financial institutions will be required to submit information on accounts held by U.S. citizens. The Intergovernmental Agreement will allow financial institutions to report the information via the Australian Tax Office under the existing Australia–US tax treaty arrangements.

In November 2015, Australia and Germany signed a new tax treaty to replace a previous double taxation agreement between Australia and Germany signed in 1972.

14. OPIC and Other Investment Insurance ProgramsShare    

The Overseas Private Investment Corporation excludes Australia, as it is not a developing country. The U.S. Export-Import Bank (Ex-Im) can provide financing and other services for major resource sector and energy projects in Australia which support U.S. jobs and exports.

15. LaborShare    

Australia has ratified seven of the International Labor Organization's eight Fundamental Conventions.

As of March 2016, the unemployment rate in Australia was 5.8 percent.

A number of laws and regulations exist to govern Australia’s workplaces, the most notable being the Fair Work Act 2009 and the Fair Work Regulations 2009. As the main legislation that governs the employee-employer relationship in Australia, it provides a safety net of minimum entitlements, enables flexible working arrangements and fairness at work, and prevents discrimination against employees. The Fair Work Act provides a safety net of enforceable minimum employment terms and conditions through the National Employment Standards (NES).

The Commonwealth Government is currently reviewing the performance of Australia's workplace relations framework, including the Fair Work Act 2009, to increase workplace flexibility and national productivity. In doing so, it is assessing the impact of the framework on matters including unemployment, underemployment, job creation, equitable pay and conditions, small businesses, business investment, the ability for employers to flexibly manage and engage with their employees, and barriers to bargaining. A Competition Policy Review final report released on March 31, 2015 highlighted a number of labor market issues under the Fair Work Act 2009 that place restrictions on the freedom of employers to engage contractors or source certain goods or non-labor services. The Commonwealth Government is currently reviewing the findings of the Competition Policy Review.

The number of industrial disputes is low by historical standards, with 224 industrial disputes in 2015.

The Australian Government provides assistance through a Fair Entitlements Guarantee scheme to people owed certain outstanding employee entitlements following the liquidation or bankruptcy of employers.

Immigration has always been an important source for skilled labor in Australia. The Immigration Department has a ‘skilled occupations list’ (SOL) which can be used by potential applicants seeking to nominate skilled occupations which are acceptable for permanent and temporary skilled migration to Australia under the General Skilled Migration program, and the Employer Nominated Scheme. Applicants must have a nominated occupation when they apply which is applicable to their circumstances.

From July 1, 2009, most Australian workplaces have been governed by a system created by the Fair Work Act 2009. Enterprise bargaining takes place through enterprise agreements, collective agreements made at an enterprise level between employers and employees about terms and conditions of employment. Such agreements are widely used in Australia. A Fair Work Ombudsman assists employees, employers, contractors and the community to understand and comply with the system. The ombudsman provides education, information and advice, and assistance to resolve workplace complaints, conduct investigations, and enforce relevant Commonwealth workplace laws. The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved.

16. Foreign Trade Zones/Free Ports/Trade FacilitationShare    

Australia does not have any free trade zones or free ports.

17. Foreign Direct Investment and Foreign Portfolio Investment StatisticsShare    

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

 

Host Country Statistical source*

USG or international statistical source

USG or International Source of Data:
BEA; IMF; Eurostat; UNCTAD, Other

Economic Data

Year

Amount

Year

Amount

 

Host Country Gross Domestic Product (GDP) ($M USD)

2015

USD1.172 trillion

2014

USD1.455 trillion

www.worldbank.org/en/country

Foreign Direct Investment

Host Country Statistical source*

USG or international statistical source

USG or international Source of data:
BEA; IMF; Eurostat; UNCTAD, Other

U.S. FDI in partner country ($M USD, stock positions)

2014

USD118 billion

2014

USD180.3 billion

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Host country’s FDI in the United States ($M USD, stock positions)

 

 

2014

USD47.3 billion

BEA data available at http://bea.gov/international/direct_investment_
multinational_companies_comprehensive_data.htm

Total inbound stock of FDI as % host GDP

2014

USD565 billion/ 39%

N/A

N/A

Austrade: https://www.austrade.gov.au/ArticleDocuments/3823/Australia-Benchmark-Report.pdf.aspx

* GDP Host Country Data from http://www.abs.gov.au/


Table 3: Sources and Destination of FDI

Direct Investment from/in Counterpart Economy Data (2014)

From Top Five Sources/To Top Five Destinations (US Dollars, Millions)

Inward Direct Investment

Outward Direct Investment

Total Inward

564,606

100%

Total Outward

443,517

100%

United States

134,029

24%

United States

111,751

25%

United Kingdom

71,664

13%

New Zealand

50,546

11%

Japan

54,235

10%

United Kingdom

45,238

10%

Netherlands

31,527

6%

Singapore

10,704

2%

China

24,581

4%

China

9,903

2%

"0" reflects amounts rounded to +/- USD 500,000.


Table 4: Sources of Portfolio Investment

Portfolio Investment Assets

Top Five Partners (Millions, US Dollars)

Total

Equity Securities

Total Debt Securities

All Countries

621,521

100%

All Countries

405,299

100%

All Countries

216,223

100%

United States

269,917

43%

United States

187,565

46%

United States

82,352

38%

United Kingdom

55,422

9%

United Kingdom

39,652

10%

Germany

25,256

12%

Germany

33,385

5%

Cayman Islands

21,065

5%

United Kingdom

15,770

7%

Cayman Islands

23,727

4%

Japan

8,447

2%

Uruguay

9,678

4%

Japan

21,452

3%

China, P.R. Hong Kong

8,447

2%

Uruguay

9,678

4%

 

18. Contact for More InformationShare    

U.S. Embassy
Moonah Place, Yarralumla, ACT
61 2 6214 5874
usrsaustralia@state.gov