Foreign Direct Investment in Australia Following the Australia–US Free Trade Agreement

Abstract

A model of inward foreign direct investment for Australia is estimated. Foreign direct investment is found to be positively related to economic and productivity growth and negatively related to foreign portfolio investment, trade openness, the exchange rate and the foreign real interest rate. Foreign direct investment is found to be a substitute for both portfolio investment and trade in goods and services. The exchange rate and the US bond rate affect foreign direct investment through the relative attractiveness of domestic assets. Actual foreign direct investment outperforms a model-derived forecast in recent years, consistent with the liberalisation of foreign investment screening rules following the Australia-US Free Trade Agreement.

What types of Chinese ODI activities are most prone to political intervention?

“…Although the Organisation for Economic Co-operation and Development (OECD) has consistently tried to clearly define 'national security' and establish principles for its review-such as nondiscrimination, transparency and predictability, regulatory proportionality and accountability-the process of such reviews remains quite opaque (OECD 2009: 1-4). Although quite a few countries have set investment and industry thresholds to trigger national security reviews, the process involved remains covert and is subject almost entirely to the discretion of the relevant agencies in the host country (Kirchner 2012).…”