Australia is a melting pot of cultures and this flows into every facet of life around the country. Investing in an Australian business or setting up a new company offers opportunities for foreign investors to diversify their portfolio while taking advantage of a potentially lucrative consumer market.
Here’s the state of play for foreign direct investment in Australia and how you can take advantage of this attractive market.
Why is Australia Such a Sought-After Investment Destination?
It is not only its unique geographic location and diversity of valuable commodities that attract global investors to Australia. It is also a well-regulated investment environment and has relatively minimal restrictions on imported goods and services. Regarded as a consistently stable and flexible economy, it is an attractive investment destination compared to more tightly controlled places around the world.
Most importantly for budding foreign investors, the process of starting up a company in Australia or investing in an existing entity is quite straightforward. The amount of government incentives spread across industries plus its proximity to booming Asian markets also makes it ripe for investment opportunities.
Related Read: Top 7 Government Grants for Startups and Small Businesses
It’s No Longer all about the Biggest Global Players
The breakdown of foreign investment into Australia has seen broad diversification in recent years. While in 2009 the combined forces of the United States and the United Kingdom made up more than $1 trillion of foreign investment into the country – making up a whopping 53% of total FDI – as of 2021 that had dropped to less than 43% total (US: 25.5%; UK: 17.4%).
This has paved the way for traditionally ‘smaller’ players on the global investment spectrum to expand their Australian investments and reap the rewards. Asia, in particular, is making positive strides, with countries like Singapore ($121.4 billion FDI as of 2021) leapfrogging larger economies with a 7% FDI increase over a five-year period.
The Rise of Asian Investments into Australia
Of great interest is the inclusion of more than a handful of Asian nations on the list of main sources of foreign direct investment stock from 2010–2020. While the United States invariably sits at the top of these tables, what’s remarkable is that Japan comes in at second place (above the UK, Netherlands, Canada and China) with a 13.7% increase in FDI over 2019–20.
Moreover, Singapore, Hong Kong, Malaysia and South Korea all sit near the top of the list. Perhaps most important is that while the OECD, APEC and EU economies saw diminished investments into Australia over 2019–20, ASEAN boosted its FDI by 5.0% during the same period.
Which Industries are Seeing the Most FDI Activity?
So, where do the biggest opportunities lie for foreign investors seeking to grow their wealth in Australia? According to the most recent figures from the Department of Foreign Affairs and Trade (DFAT), the top industries for FDI are:
- Mining and quarrying: 34% (worth $360.6 billion as of 2021)
- Real estate: 12.9%
- Finance and insurance: 11.5%
- Manufacturing: 11.0%
- Wholesale and retail trade: 5.7%
- Information and communication: 3.2%
- Transport and storage: 2.4%
Related Read: Choosing the Perfect Business Location in Australia
An Opportunity for Southeast Asia’s Burgeoning Economies
While for decades China has been one of Australia’s standout trading partners, recent global turmoil and political tensions have caused a rift between the two nations. Indeed, recent KPMG figures reveal Chinese investment into Australia had declined by 69.8% between 2020 and 2021, while the number of completed transactions during that period almost halved.
But these tensions actually provide an opportunity for burgeoning economies across Southeast Asia to plug the gaps left by China and take advantage of all the diverse investment opportunities afforded in Australia.
Singapore and Hong Kong have for years recognised the value of FDI into Australia, but an economic retreat by China leaves the door open for other interested parties as well, particularly Vietnam, Indonesia, the Philippines and India.
The two-way trade between Australia and the Association of Southeast Asian Nations (ASEAN) members will surpass $150 billion in the fiscal year 2021-2022, surpassing trade with Japan and the US. More than 14% of Australia’s total trade is conducted with ASEAN countries.
Looking to Invest in Australian Business?
Investing in a foreign nation like Australia can be a time-consuming process and any mistakes made can cause lengthy delays with government authorities.
This is why InCorp Advisory Australia has the FDI expertise to guide you through the entire journey. We will work to understand your financial capacity and industry preferences so you can make the best investment decision for your overall strategy.