New research into foreign investment
Foreign investment in Australasia is a big driver of our region’s development, but has also caused concern on a local level as a lack of information has led to skewed perspectives and media coverage. With this in mind, the University of Sydney and KPMG recently paired up to deliver some unique insights into China’s role in Australia’s economy.
What did you expect?
According to the report, titled Demystifying Chinese Investment in Australia, New South Wales attracted 72 per cent of all Chinese investment in Australia. Now, before you give up on the rest of the study and click on a video about kittens, there were also some real surprises that could change the way you view foreign direct investment (FDI) in Australia.
For starters, investment has been concentrated in commercial real estate and infrastructure. This is as opposed to mining, which used to be much more prevalent. In fact, commercial real estate made up almost half of all Chinese FDI in Australia at 46 per cent in 2014 – a huge jump from 14 per cent in 2013.
The amount of outbound investment from China also increased 11 per cent over 2014 according to the report, and it is expected that the areas most likely to benefit are infrastructure and commercial real estate – as mentioned above – as well as the food industry.
There has also been a decrease in Chinese investment in Australia between 2013 and 2014, from $9.19billion (USD) to $8.35billion, a drop of just over nine per cent. However, it should be noted that 2013 wasn’t just an exceptional year for Australia. The USA went from $14billion that year to $12billion the next, a notable decrease of 14 per cent.
Overall, however, the Australian Bureau of Statistics (ABS) reveals that foreign investment in Australia increased $261.2billion (or ten per cent) over 2014 to reach $2,784.5billion for the year. So, where does China come into this surge in investment? Nowhere near the top of the heap, according to the ABS.
The leading investor country for the year ended 31 December was the USA at $758.2billion. This represents more than a quarter of all FDI in Australia (27 per cent). Next up was the UK, with 17 per cent and then Belgium with eight per cent. Japan pulled together six per cent, while Singapore sat at three per cent ($80.2billion), just ahead of Hong Kong, counted as a special administrative region (SAR) of the People’s Republic of China with roughly three per cent as well ($77.3billion).
The diverse nature of foreign investment in Australia’s businesses, real estate and infrastructure should give pause to those who have been solely consumed in the narrow topic of foreign investment in residential real estate in Australia. While it is nevertheless and important part of our economy and community, there is also a much larger picture to be considered as well.
Where do Australians spend their money?
Well, this isn’t a question we often ask ourselves, because we don’t think of ourselves as foreigners. So, where do Australians sink their outbound direct investment (ODI)? According to the ABS, the USA is the number one destination at $575.5billion in 2014 – 30 per cent of our ODI.
Predictably, next in line is the UK with 16 per cent, but then comes New Zealand at five per cent. Japan with its four per cent edges out Germany on three. China comes in $7.5billion lighter than Germany in 6th place, excluding SARs and Taiwan Province.
When considering Australia’s role in the world, it’s clear that we have a lot to give. We have a strong real estate market, as well as an innovative and hard-working labour force. Our companies are cutting edge and our resources are here in abundance. The clear challenge for our nation is therefore to direct both inbound and outbound foreign investment to where it is needed most, so that we can continue our great legacy as stewards of this wide land.