Australia is an attractive destination for overseas investors. This blog examines why. It asks the big questions: what keeps our foreign investors coming? What makes Australia stand out as an attractive investment destination in the Asia-Pacific region?
These are important questions because Australia has a great story to tell on investment. In the previous blog, I noted investment in Australia hit a record of A$4 trillion in 2020.
Australia is a top-ranked country for ease of doing business
Australia is one of the easiest places in the world to do business. According to rankings published by the World Bank that compare the ease of doing business in different countries, Australia rose four places to 14th position in 2020.
This is a more impressive result than it might appear. Small countries and city states seem to naturally perform well in ease-of-doing business surveys. But among countries with more than 20 million people, Australia now ranks fifth in the world. Korea is first, the US second, the UK third, Malaysia fourth.
Australia ranks particularly well in some of the key factors that contribute to a good ‘ease of doing business’ score. For example, Australia ranks:
- fourth out of 190 economies in terms of gaining credit
- sixth for enforcing contracts
- seventh for ease of starting a business.
The standout for Australia is how well we rank among peer economies in Asia. Among all the metrics for ease of doing business, only Singapore, Hong Kong and South Korea perform better. Australia out-performs Taiwan, Thailand, Japan, China, India, Vietnam, Indonesia and the Philippines.
A stable and efficient business environment
Another factor in Australia’s investment-attraction success is a stable and efficient business environment. According to World Economic Forum data (see below), Australia has some truly impressive rankings:
- lowest in the world for debt dynamics (the change in the public debt-to-GDP ratio)
- second highest for social capital (which includes social cohesion and engagement)
- third highest for trade openness.
According to the IMD World Competitiveness Center (see below), Australia scores highly in some of the key metrics for business efficiency. This includes country credit ratings (1st globally), justice (5th), tariff barriers (5th), intellectual property rights (8th), and equal opportunity legislation (9th).
Table 1: Business efficiency and environment, 2020.
|Australia||US||UK||China||India||Japan||Korea||Hong Kong SAR||Singapore|
|WEF Global Competitiveness Report 2019 Ranking(a) in:|
|Soundness of banks||5||25||52||95||89||33||62||3||2|
|Time to start a business (days)||6||31||=21||56||=90||70||=14||=2||=2|
|Energy efficiency regulation||7||12||8||21||33||31||3||n/a||19|
|Non-performing loans % of gross total loans||10||14||8||26||106||15||3||6||17|
|IMD World Competitiveness Yearbook 2020 Ranking(b) in:|
|Index of three country credit ratings: Fitch, Moody’s and S&P||=1||11||18||=27||=49||31||=19||15||=1|
|State ownership of enterprises is not a threat to business activities||2||13||18||49||27||16||55||7||24|
|Justice is fairly administered||5||23||15||32||34||22||40||8||7|
|Intellectual property rights are adequately enforced||8||14||10||42||48||33||38||=12||5|
|Equal opportunity legislation encourages economic development||9||22||19||23||29||26||41||13||8|
|Competition legislation efficient in preventing unfair competition||10||25||8||44||38||22||=40||21||=5|
|Attracting and retaining talents is a priority in companies||10||6||32||29||37||14||11||15||18|
Notes: 1. Debt dynamics measures the change in public debt-to-GDP ratio, weighted by a country’s credit rating and debt level in relation to its GDP. 2. Social capital measures national performance in three areas: social cohesion and engagement (bridging social capital), community and family networks (bonding social capital), and political participation and institutional trust (linking social capital). 3. Trade openness comprises indicators of prevalence of non-tariff barriers, trade tariffs %, complexity of tariffs and border clearance efficiency. 4. Tariffs on imports: Applied weighted mean tariff rate for all products.
Sources: (a) World Economic Forum, 2019, Global Competitiveness Report; (b) Institute for Management Development, 2020, World Competitiveness Yearbook 2020; Austrade
A free society with good governance and an enterprising spirit
The quality of governance in Australia ranks among the best in the world. In Australia, fair and effective governance is seen as the foundation for economic growth and a free society.
This is reflected in global surveys. Australia’s regulatory regimes, rule of law, control of corruption and public accountability are all graded highly by the World Bank.
A reputation for good governance inspires confidence among global investors. And it has knock-on effects. Australia’s governance qualities make us a secure base for multinationals seeking a base for expansion in the Asia-Pacific region.
Australia’s enterprising spirit
Australia also has one of the most entrepreneurial business cultures in the world, according to the Global Entrepreneurship and Development Institute.
Enterprise is a crucial engine of economic growth and the organisation’s annual index measures entrepreneurial attitudes, abilities and aspiration.
Australia ranked sixth out of 137 countries for enterprise attributes in 2019, according to the Institute. Australia was placed just behind the UK and ahead of Germany, Korea, Norway, Japan, China and ASEAN (including Singapore).
A global fifth place for digital government
Australia’s also ranks highly for our ability to foster a healthy digital economy and a healthy digital society. The Australian Government is a technology early adopter – and this helps. The United Nations E-Government Development Index (EGDI)1 ranked Australia fifth out of 193 governments in 2020.
Putting government services online typically increases the efficiency of interactions between businesses, individuals and government departments. For example, Australia’s centralised online government service, myGov, brings health, tax and welfare interactions into one portal.
Low cost of living in the Asia-Pacific region
There’s one other, fundamental reason why companies invest in Australia: people like living here.
Australia’s capital cities are the envy of the world. They support a free and easy lifestyle that appeals to immigrant families and global professional talent. So, it is no surprise that our cities top ‘liveability’ rankings in the Asia-Oceania region.
Our cost of living is also relatively low, according to Mercer’s 2020 Cost of Living Index. This makes Australia a cost-competitive destination for international companies that want to relocate employees and their families and for adventurous young workers who want to broaden their horizons.