NORTH AMERICA TOPS LIST ON INVESTMENT

China may be Australia’s largest trading partner by some margin, but the level of new inbound commercial investment is dominated by one continent: North America.
 
In the first quarter of 2022-23, the United States, with $11.5 billion, and Canada, $6.7 billion, were the largest source countries by value for commercial investment proposals in Australia.
 
According to a quarterly report released last month by Federal Treasury, investment from the US and Canada ranked ahead of Singapore ($4.8 billion), China ($1.7 billion) and Thailand ($1.6 billion).
 
The paper was the first quarterly report on foreign investment released by Treasury, in a move to provide greater transparency on foreign investment activity in Australia.
 
For the entire 2021-22 year, the US was by far the most dominant investment source for Australia, pumping almost $119 billion into new commercial investment, well ahead of Canada ($31.5 billion) and Singapore ($24 billion).
 
Residential real estate, however, is a different story.
 
In the first quarter of 2022-23, China was the largest source country for residential real estate investment proposals, recording $1 billion (out of a total $2.9 billion) for 731 approved proposals.
 
No sign of the US or Canada in the top 10, with Hong Kong and Vietnam filling distant second and third places, ahead of six other Asian countries, and the United Kingdom.
 
In 2021-22, Chinese interests accounted for $2.4 billion, or 2317 approved real estate investment proposals in Australia, again ahead of Hong Kong and Vietnam.
 
By industry sector, commercial real estate and the services sector together accounted for the lion’s share of approved investment proposals for the first quarter of 2022-23, with $30 billion of the total $51.5 billion.
 
Commercial real estate totalled $15.2 billion and services $14.8 billion, followed by mineral exploration and development, and the finance and insurance sector.
 
But the industry composition of commercial investment can be highly variable, dependent on the type of international merger and acquisition activity in Australia.
 
For example, in 2021-22, the services sector ($109 billion) accounted for the highest value of foreign investment by industry, ahead of finance and insurance, on $94.7 billion, and commercial real estate, $66.6 billion.
 
The Treasury quarterly report also provides an insight into the impact of new national security considerations in foreign investment assessments.
 
Foreign investment reforms introduced in early 2021 required investors to provide mandatory and voluntary notification for actions that may pose national security concerns.
 
In the first quarter of 2022-23, a total of 37 investment proposals were approved for national security, of which 10 were approved with conditions and 27 approved without conditions.
 
Over the previous financial year, a total of 106 national security investment proposals were approved, 39 with conditions and 67 without conditions.
 
Under Australia’s foreign investment framework, Treasury assesses commercial investment proposals and the Australian Taxation Office is responsible for residential real estate investment proposals.
 
The Foreign Investment Review Board advises the Federal Treasurer on the policy and administration of the foreign investment framework.
 
Gavin Clancy is a Senior Consultant with Lunik