An annual report shows the impact of Covid-19 and new rules on investors who would usually target Australia’s attractive assets.
Covid-19 Drove Down Foreign Investments Into Australia, Recovery Expected This Year
CANBERRA, Australia — Foreign investors are more wary about snapping up Australian assets, but officials tip a recovery.
The value of approved proposed investment fell to AU$195.5 billion ($144.60 billion) in 2019-2020 from AU$241 billion ($178.24 billion) a year earlier, as per an annual report tabled in parliament by the Foreign Investment Review Board on August 3.
The volume of deals also fell.
“2019–20 saw a decline in the number and value of approvals for proposed foreign investment in Australia compared to 2018–19,” states the report.
“Business applications were impacted in the second half of 2019–20 by the global economic downturn caused by the Covid-19 pandemic.”
Proposals valued over AU$2 billion ($1.5 billion) fell in number to 11 in 2019-2020 compared to a peak of 23 proposals approved in the year before.
A recovery is predicted for 2020-2021, with Australia continuing to remain an attractive destination for foreign investment.
Fewer foreign buyers chasing Australian residential real estate contributed to a drop in the number of investors but not a drop in value as prices accelerate.
Some 7056 residential real estate applications valued at AU$17.1 billion ($126.52 billion) were approved in 2019-2020, down 455 on a year earlier, but up AU$2.3 billion ($1.7 billion) in value.
The tax office completed 620 residential real estate investigations, identifying 259 properties in breach, less than half the number of violations in 2018-2019 as new rules bite.
Board chair David Irvine said significant changes had protected Australia’s interests during a year of global economic upheaval due to the Covid-19 pandemic.
“The board worked with applicants and business to navigate the impacts of the shock to Australia’s foreign investment system,” he said.
Policymakers recognized foreign capital would support distressed businesses and economic recovery but were wary many usually viable businesses could pass into foreign hands.
The threshold for scrutiny of foreign investment dropped to $0 to give the government complete oversight of all transactions and potential predators at a time of crisis.
While approved proposed investment deals from China fell by almost 600 in 2019-2020, the value remained relatively steady at AU$12.75 billion ($9.43 billion).
China was the sixth largest by value, behind the United States, Japan, Singapore, Canada, and the United Kingdom.
The service sector continued to be the largest sector by value in proposed investment at AU$73.6 billion. It reflected a fall of AU$2.4 billion ($1.8 billion) relative to 2018-19. The second biggest sector was the commercial real estate sector which saw a fall from AU$73 billion to AU$38.8 billion.
New foreign investment measures took effect from January 1 this year to stop purchases on national security grounds.
The annual report predicted a recovery in 2020-21, attributing the investor interest in the country to a stable democracy, a highly-equipped workforce, and Australia’s proximity to fast-growing markets and an abundance of natural resources.
Edited by Saptak Datta and Krishna Kakani