View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Investment
August 11, 2020updated 18 Sep 2020 11:57am

The state of play: FDI in Australia

Australia’s FDI performance had already been slowing in 2019, and the country now has the impact of Covid-19 to deal with. This is particularly notable in key sectors such as mining and manufacturing, which are facing supply chain issues. Ruth Strachan reports.

By Ruth Strachan

The World Investment Report 2020 from the UN Conference on Trade and Development (UNCTAD) showed a slowing of foreign direct investment (FDI) inflows in 2019, which saw Australia drop five places in the global table, from seventh in 2018 to 12th for its inflows last year. In correlation with this, the value of cross-border mergers and acquisitions in Australia had significantly decreased. Their value dropped by approximately 47% in Australia, according to the report, from $68bn in 2018 to $36bn in 2019.

This slowdown came before the Covid-19 pandemic, and Australia has since put in place new screening regulations and investment restrictions. The country has also introduced stricter investment reviews to protect national interests and local assets from aggressive acquisitions.

Covid repercussions

With global FDI markets now under a cloud of uncertainty, Australia has already felt the repercussions. On 20 March 2020, Canadian retail giant Alimentation Couche-Tard withdrew plans worth an estimated $5.9bn to acquire the share capital of Caltex Australia, a petroleum refinery operation based in Sydney. Couche-Tard cited uncertainty over the global economic outlook as the reason for its withdrawal.

Another factor creating uncertainty for Australia’s FDI landscape is the UK’s exit from the EU. The UK is Australia’s second largest source market for foreign investment (after the US, which invested $205bn in FDI alone in 2019) with an overall investment attributed to FDI of $127bn. Australia has entered into negotiations with the UK over a free-trade agreement. AusTrade has reported that it hopes “this will build on existing strengths in two-way trade and investment, and will support the post-Covid economic recovery in both countries”.

Key sectors for FDI in Australia have come under pressure following the Covid-19 pandemic’s impact on supply chains. In 2019, mining and quarrying took the bulk of FDI in Australia with 35.3% of the total capital investment, coming to $360.1bn. Manufacturing was second with 12.9% and a value of $131.4bn. Both have faced supply chain, worker capacity and capital issues since the onset of Covid-19, and as a result inbound investment figures in these sectors are likely to drop in 2020.

Related Companies

Topics in this article:
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. A weekly roundup of the latest news and analysis, sent every Friday. The pharmaceutical industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU