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Foreign investment in Australia 1.89 MB

Foreign investment has always been important for Australia’s economy, for jobs, and is crucial for Australia’s COVID-19 recovery.

Investment expands the Australian economy, leading to higher wages and more jobs, but the money for this investment must come from somewhere — foreign funding lets us make better and more investments than would be possible from Australian investors alone.

However, the benefits to the Australian economy must be carefully balanced against community concerns and Australia’s national interest. Australia regulates foreign investment, and although the system works well, it could be improved.

Key points:

  • Over the past two centuries, foreign funding has supported Australia’s economic development by permitting more capital investment than domestic savings would have otherwise allowed.
  • To balance the economic benefits of foreign investment against the risks, and to maintain community confidence that foreign investment is in the national interest, Australia regulates foreign investment through a range of mechanisms.
  • Foreign investment policy has become more prominent over recent years. Greater attention is being given to the difficulty of taxing multinationals and the national security risks associated with sensitive sectors or critical infrastructure assets — as, for the first time, one of our largest sources of investment is not a democracy or a military ally.
  • Policy change in response has been piecemeal. Monetary thresholds for screening vary by source country, sector and type of investor, while the use of approval conditions is increasing.
  • Overall, the design and vesting of responsibility with the Treasurer for administering the ‘national interest’ test works well. It gives flexibility to quickly adapt to new concerns, weighing up not just the costs, but also the benefits from foreign investment. The ‘negative’ nature of the test (deciding whether proposals are contrary to the national interest) also limits the risk of rejecting projects that are in the national interest. These features should be retained.
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