Foreign investment has allowed Australians to enjoy higher rates of economic growth, employment and living standards than could have been achieved from domestic savings alone.
This is because it:
- supplements scarce domestic savings – due to Australia's small population relative to investment opportunities, foreign investment has provided access to needed capital;
- allows access to new technologies – foreign companies often transfer technology to Australia when they invest, making us more internationally competitive;
- creates new businesses and employment – foreign companies setting up subsidiaries in Australia create jobs, leading to economic growth;
- provides revenue to the government – profits of foreign-owned companies are taxed, spreading the benefits of these investments to all Australians; and
- helps drive productivity growth – it increases the level of competition in the market.
A number of studies have examined the impact of foreign investment. In 2010 a study by Access Economics found that a 10 per cent increase in foreign investment in Australia would lead to a more than one per cent increase in GDP by 2020. An OECD study found that increasing foreign investment as a share of GDP is significantly and positively associated with productivity growth.