Australia

AUSTRALIA Location Offer

Australia has one of the most stable economic, political and social environments in the region. Its government and regulatory institutions are reliable, transparent, impartial and internationally competitive – providing investors with a safe and secure business framework.

Australia has one of the strongest economies in the world, with almost two consecutive decades of growth and the unemployment rate falling to generational lows. As a result of nearly three decades of structural and policy reforms the economy is flexible, resilient and increasingly integrated with global markets.

The strength of Australia’s economy has been highlighted in recent years by its ability to withstand a number of internal and external events, including a major drought, a housing boom and the global financial and economic crises which began in 2008.

Australia’s economic strengths, world leading corporate governance standards, innovative skills base,cultural diversity and political stability make it a very attractive investment destination.

Australia is endowed with a resource base which has underpinned the development of our great mining and agricultural industries. Today Australia has a sophisticated, modern economy with services industries dominating economic activity.

Australia’s attraction as an investment destination is undeniable. One of the most resilient economies in the world, Australia is the gateway to the world’s fastest growing region, the Asia-Pacific.

Main Industry Sectors

The tertiary sector occupies a dominant position in the Australian economy (more than three-fourths of the GDP), but the agricultural and mining sectors are the most important for its exports. Australia is a vast agricultural country and one of the world’s main exporters of wool, meat, wheat and cotton. The country is overflowing with mineral and energy raw materials, the export of which ensures it substantial revenues. Australia is among the top 10 producers and exporters of most mineral ores. It has the world’s greatest reserves of numerous strategic resources such as uranium, of which it has 40% of the world’s proven reserves.

 

Traditionally Australia is a finished goods importer. Its industrialization is fairly recent, a fact which explains the small scale of its manufacturing sector, which only employs 10% of the active population. The manufacturing industry is built up around the food industry (approximately a fifth of the workforce), machinery and equipment (around 20%), metal processing and metal goods (nearly 20%) and the chemical-petrochemical industry (slightly more than 10%).

 

Economic Overview

Australia is the world’s thirteenth largest economic power. After a slowing down due to global recession, in 2010 the Australian economy has been growing again, with an estimated growth rate of 3 % of the GDP. This good economic performance owes to the government’s fiscal policy of incentives, by the increase in household consumption and especially by the continuous Chinese demand which helps exports.

The Australian government’s priorities are to improve the country’s competitiveness, namely with regards to the export competition of Asian countries and to deal with the challenges of its aging population and its environment which is vulnerable to climatic problems (droughts).

Australia is a prosperous country and its per capita GDP is amongst the highest in the world. Despite the recent increase in unemployment rate due to the global economic crisis, it remains consistently low, around 5%.

 

FDI in Figures

In terms of foreign direct investment (FDI), Australia is ranked 13th in the world but 3rd in the Asia-Oceania zone, behind Hong-Kong and China (since 2005). Traditionally, Australia is an investment destination. Its economic liberalism, its stability and judicial system transparency, combined with strong economic growth of more than 15 years, make up for the narrowness of its market and its geographical isolation, and make it a desirable destination. The effects of the 2008-2009 financial crisis have not harmed its capabilities and Australia remains a valued destination to a number of investors.

 

FDI Government Measures

Foreign companies get assistance, especially for productive investment, R&D, professional training and job creation. For many years, the amount of administrative formalities for setting up foreign companies has been reduced.

 

Australia welcomes foreign investment. It recognises the important role of foreign investment in boosting economic growth, developing competitive industries, creating jobs and increasing exports with particular interest in:

 

* financial services

* clean energy and environment

* advanced manufacturing

* health and biotechnology

* infrastructure

* agribusiness

* ICT

* mining and resources

* professional and business services

* education, creative industries, sport, and tourism

 

 

Regulation of foreign investment:

The Australian Government takes a very open and positive stance to foreign investment. However, as

a sovereign state, it still reserves the right to ensure that investments are in line with Australia’s national interest. The national interest in relation to a particular application is determined by the Treasurer. In making decisions, the Treasurer takes advice from the Foreign Investment Review Board (FIRB). Key considerations include national security and economic development.

 

Australia’s foreign investment screening regime is premised on the assumption that foreign investment is beneficial to Australia. As a consequence, it is necessary for the Treasurer to establish that a foreign investment proposal would be contrary to the national interest in order to be blocked. Australia’s screening regime involves a simple process that provides certainty for foreign investors. Australia’s foreign investment framework provides for Government scrutiny of some proposed foreign purchases of Australian businesses and land through compulsory and voluntary notification requirements. At the centre of the framework is the Foreign Acquisitions and Takeovers Act 1975 (the FATA).In the majority of industry sectors, smaller proposals are exempt from notification and larger proposals are approved unless judged contrary to the national interest. The screening process undertaken by the FIRB enables comments to be obtained from relevant parties (including State and Territory governments) and other Australian Government agencies in considering whether larger or more sensitive foreign investment proposals are contrary to the national interest.

 

The Australian Government determines what is contrary to the national interest by having regard to the widely held community concerns of Australians. Reflecting community concerns, specific restrictions on foreign investment are in force in more sensitive sectors such as the media and developed residential real estate.

 

Screening of investment proposals

The FIRB examines proposals by foreign interests to undertake direct investment in Australia and makes recommendations to the Australian Government on whether those proposals raise any national interest concerns.

 

Does this apply to all investment or, are there differential treatment?

 

Conditions of investment

Australia’s Foreign Investment Review Framework

 

The Foreign Investment Policy and the Legislation The Foreign Acquisitions and Takeovers Act 1975 (FATA) provides the legislative framework for our screening regime. The FATA allows the Treasurer or his delegate – usually the Assistant Treasurer – to review investment proposals to decide if they are contrary to Australia’s national interest.

 

The Treasurer can block proposals that are contrary to the national interest or apply conditions to the way proposals are implemented to ensure they are not contrary to the national interest. When making such decisions, the Treasurer relies on advice from the FIRB.

 

The Policy provides guidance to foreign investors to assist understanding of the Government’s approach to administering the FATA. The Policy also identifies a number of investment proposals that need to be notified to the Government even if the FATA does not appear to apply.

 

Who Needs to Apply?

 

All foreign governments and their related entities should notify the Government and get prior approval before making a direct investment in Australia, regardless of the value of the investment. Foreign governments and their related entities also need to notify the Government and get prior approval to start a new business or to acquire an interest in Australian urban land (except when buying land for diplomatic or consular requirements).

Privately-Owned Foreign Investors – Business Acquisitions Foreign persons should notify the Government before acquiring an interest of 15 per cent or more in an Australian business or corporation that is valued above $231 million. They also need to notify if they wish to acquire an interest in an offshore company whose Australian subsidiaries or gross assets are valued above $231 million (adjusted annually on 1 January).

 

The exception is for ‘US investors’, where the $231 million threshold applies only for investments in prescribed sensitive sectors. A $1004 million threshold applies to US investment in other sectors. To calculate the value of a business or corporation, you need to consider the value of the total issued shares of the corporation or its  total gross assets, whichever is higher.

 

All foreign persons, including US investors, need to notify the Government and get prior approval to make investments of 5 per cent or more in the media sector, regardless of the value of the investment.   Foreign persons should also be aware that separate legislation includes other requirements and/or imposes limits on foreign investment in the following instances:

* foreign investment in the banking sector must be consistent with the Banking Act 1959, the Financial

Sector (Shareholdings) Act 1998 and banking policy;

* total foreign investment in Australian international airlines (including Qantas) is limited to 49 per cent;

* the Airports Act 1996 limits foreign ownership of airports offered for sale by the Commonwealth to 49 per cent, with a 5 per cent airline ownership limit and cross ownership limits between Sydney airport  (together with Sydney West) and Melbourne, Brisbane and Perth airports;

* the Shipping Registration Act 1981 requires a ship to be majority Australian-owned if it is to be registered in Australia; and

* aggregate foreign ownership of Telstra is limited to 35 per cent of the privatised equity and individual foreign investors are only allowed to own up to 5 per cent. Foreign persons should also notify if they have any doubt as to whether an investment is notifiable.

 

Privately-Owned Foreign Investors – Real Estate

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Australia

 

Foreign persons should notify the Government and get prior approval to acquire an interest in certain types of real estate. An ‘interest’ includes buying real estate, obtaining or agreeing to enter into a lease, or financing or profit sharing arrangements.

Regardless of value, foreign persons generally need to notify the Government to take an interest in residential real estate, vacant land or to buy shares or units in Australian urban land corporations or trust estates.

Foreign persons also need to notify if they want to take an interest in developed commercial real estate that is valued at $50 million or more – unless the real estate is heritage listed, then a $5 million threshold applies. An exception for developed commercial real estate applies to US investors, where a $1004 million threshold applies instead.

Foreign persons should also notify if they have any doubt as to whether an investment is notifiable.

More Information Foreign Investment Review Board (http://www.firb.gov.au)

 

Country Strong Points

The customary Australian dynamism, its economic robustness, its strong growth, stable and juridically reassuring business environment and position as a practical access platform for certain markets, like New Zealand and the Pacific islands, make this country a choice target for establishment.

 

Country Weak Points

Reduced competition in some sectors can limit returns on scale. Lack of investment in transport and telecommunication infrastructures sometimes slows down growth in some sectors.

 

Foreign Trade Overview

Australia’s external trade is characterized by a structural trade deficit. The increase in exports has not compensated for the high imports which are stimulated by a strong Australian dollar. In terms of continuous growth, and despite healthy exports, the deterioration of the current account balance and of the structural deficit are still the Australian economy’s weak points.
The country is becoming more and more dependent on Asian economies and the price of raw materials. Australian foreign trade is not well developed, a fact which reflects the country’s relatively weak globalization integration. Australia must improve its infrastructures in order to redress the bottlenecks that have been restricting exports for a long time, so as to allow it to better integrate in global trade. The country’s main trade partners are Southeast Asia, the United States and the European Union.