About foreign investment
The benefits of foreign investment
Foreign investment is integral to the Australian economy. As an open, well-regulated economy with a highly skilled workforce, Australia enjoys an international reputation for innovation. To make the most of these advantages, Australia uses international capital to supplement domestic savings.
Foreign investment helps Australia reach its economic potential by providing capital to finance new industries and enhance existing industries, boosting infrastructure and productivity and creating employment opportunities in the process.
The higher growth supported by foreign investment pays dividends for all Australians by increasing tax revenues to the federal and state governments, and increasing the funds available to spend on hospitals, schools, roads and other essential services.
Foreign investment has other benefits beyond injecting new capital. By bringing in new businesses with connections in different markets, it opens up additional export opportunities, boosting our overall export performance. It also encourages competition and increased innovation by bringing new technologies and services to the Australian market.
Why does Australia need foreign investment?
As a resource rich country with a relatively high demand for capital and a small population, foreign investment fills the gap between what Australia saves and invests every year. Australia's national investment and saving gap has been on average about 4 per cent of GDP over the last few decades.
Total investment is usually funded by a combination of domestic savings and foreign investment. Australia has, however, recently flipped from being a net overseas borrower to a net lender.
At the end of 2021, total investment flows stood at $497 billion, comprising $571 billion in domestic savings and -$74 billion in foreign investment (ABS, National Accounts).
Without foreign investment Australia would be unable to build our economy to its full potential and would have less funds available to spend on hospitals, schools, roads and other government services.