Foreign Investment PPT 2 Flashcards
(20 cards)
What is Australia’s current position on net foreign equity?
Australia has a net foreign equity asset position, meaning we own more foreign equity than foreigners own in Australia.
What is Australia’s current position on net foreign debt?
Australia has a net foreign debt liability position, indicating we owe more debt to the rest of the world than they owe to us.
What happens when there is inward foreign investment into Australia?
t results in an outflow of earnings (interest/dividends) to the rest of the world.
What is the main form of foreign investment into Australia?
he majority is in the form of debt, not equity.
What is the main form of Australian investment abroad?
The majority is in the form of equity.
What is Foreign Direct Investment (FDI)?
FDI is when a foreign entity invests in an Australian business with at least 10% ownership, providing control or influence over operations.
What happens when Australians invest abroad (outward investment)?
It results in an inflow of earnings (returns on foreign assets) into Australia.
What are key features of FDI?
Long-term and stable
Minimum 10% equity stake
Investor can influence management
Example: Toyota opens a plant in Australia
Why is Australia attractive for FDI?
Strong and stable economy
Political/legal certainty
Proximity to Asia
Free Trade Agreements (FTAs)
What industries receive most FDI in Australia?
Mainly the mining, finance, and housing sectors.
What is Foreign Portfolio Investment (FPI)?
FPI involves buying financial assets (e.g., shares or bonds) without any intention to control or manage the business.
What are key features of FPI?
Less than 10% equity
Short-term/speculative
More volatile
Example: Buying shares on a foreign stock exchange
What are examples of debt securities under FPI?
Australian Government Bonds (low risk, fixed interest)
Corporate Bonds (issued by Australian firms to raise capital)
What is driving Australia’s outward FPI?
Growth of superannuation funds, which invest globally for long-term retirement savings.
How much have superannuation balances grown since 1992?
From $148 billion in 1992 to $3.5 trillion in 2024.
What does a positive number in the investment graph represent?
A net inflow of funds into Australia.
What does a negative number in the investment graph represent?
A net outflow of funds from Australia.
How did COVID-19 affect net FDI in Australia?
Net FDI declined due to the global economic recession.
How stable is FDI compared to FPI?
FDI is generally stable and long-term; FPI is volatile and short-term.
What affects the volatility of FPI?
Share market performance
Business profitability
Relative interest rates
