Australia is generally welcoming to foreign investment, which is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is by far the largest source of foreign direct investment (FDI) for Australia. According to the U.S. Bureau of Economic Analysis, the stock of U.S. FDI totaled USD 163 billion in January 2019.
Mining and resources attract, by far, the largest share of FDI from the United States. Real estate investment is the second largest recipient of FDI from the United States, although it remains much smaller than mining investment in absolute terms. The Australia-United States Free Trade Agreement, which entered into force in 2005, establishes higher thresholds for screening U.S. investment for most classes of direct investment.
While welcoming toward FDI, Australia does apply a “national interest” test to qualifying investment through its Foreign Investment Review Board screening process. Various changes to Australia’s foreign investment rules, primarily aimed at strengthening national security, have been made in recent years. The Security of Critical Infrastructure Act 2018 and the related Telecommunications Sector Security Reforms were both introduced in 2018 with the aim of increasing the security of critical infrastructure and protecting against foreign investments deemed to not be in Australia’s interests. In March 2020 the Australian government announced all foreign direct investment would be reviewed for a six-month period, the government’s assumed timing for the COVID-19 crisis. Despite the increased focus on foreign investment screening, the rejection rate for proposed investments has remained low and there have been no cases of investment from the United States having been rejected in recent years.
In response to a perceived lack of fairness, the Australian government tightened anti-tax avoidance legislation targeting multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also gone further than the international community in some areas.
Australia has a strong legal system grounded in procedural fairness, judicial precedent, and the independence of the judiciary. Property rights are well established and enforceable. The establishment of government regulations typically requires consultation with impacted stakeholders and requires approval by a central regulatory oversight body before progressing to the legislative phase. Anti-bribery and anti-corruption laws exist, and Australia performs well in measures of transparency. Australia’s business environment is generally conducive to foreign companies operating in the country, and the country ranks 14th overall in the World Bank’s Ease of Doing Business Index.
The Australian government is strongly focused on boosting economic productivity, particularly through increased use of digital and other emerging technologies. It recently released a Digital Economy Strategy, a Blockchain Roadmap, and a Critical Minerals Strategy, and has launched the new Australian Space Agency, among other initiatives. U.S. involvement and investment in these fields is welcomed.
|TI Corruption Perceptions Index||2019||12 of 180||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||14 of 190||http://www.doingbusiness.org/
|Global Innovation Index||2019||22 of 129||https://www.globalinnovationindex.org/analysis-indicator|
|U.S. FDI in partner country (historical stock positions)||2018||USD 163 billion||https://apps.bea.gov/international/
|World Bank GNI per capita||2018||USD 53,230||http://data.worldbank.org/indicator/