Supply Chains: Australia
Australia has had a generally open and welcoming foreign investment climate, and its largest sectors of the economy, mining and agriculture, attract the majority of inbound foreign investment. Although foreign direct investment (FDI) inflows have been building over the past decade, due to recent tensions with China, Australia’s largest trading partner, inbound FDI has plummeted. In 2021, Australia received US$25 billion of inbound FDI versus US$48.4 billion five years earlier, a decrease of 48 percent. In 2021, Australia's real GDP grew by 4.6 percent.
Historically, Australia has been an attractive destination for foreign investors due to its political stability, strong legal system, and overall ease of doing business. That said, a relatively high corporate tax rate and strict compliance requirements have caused some investors to complain of unfavorable treatment. Additionally, in 2019 Australia began implementing tougher screening policies for foreign investors in specific industries with potential security risks, such as defense manufacturing, technology, energy, and telecommunications. Australia currently ranks 79 out of 146 in economic complexity and looks to boost economic productivity by investing in emerging and digital technologies.
Despite Australia’s recent shift toward protecting strategic interests and increased scrutiny in foreign investment for certain sectors, it continues to implement measures to improve its investment climate. The government provides streamlined support to potential investors looking to set up new businesses and provides assistance particularly for investments that help facilitate research and development, job creation, and professional training. Australia’s top sources of FDI in recent years have been the United States, the United Kingdom, and Japan.
Recent Investment/Supply Chain Policies
On October 1, 2020, the Australian government announced the Modern Manufacturing Initiative, which provides AU$1.3 billion (US$973 million) in funding for “large manufacturing projects that have broad sectoral benefits across the National Manufacturing Priorities” and helps manufacturers integrate into international supply chains. The priority sectors for this initiative are resources technology and critical minerals processing, food and beverage, medical products, recycling and clean energy, defense, and space.
On October 1, 2020, the Australian government announced the Supply Chain Resilience Initiative, which will allocate AU$107.2 million (US$79.4 million) to examine vulnerable, essential and critical products –– starting with common medicines, PPE and agricultural production chemicals. On July 2021, the Government started delivering grants to businesses to build capabilities that address and identify critical supply chain vulnerability.
On May 14, 2021, the government announced a variety of measures to “attract talented individuals and exceptional businesses to Australia.” For example, the government plans to “finalize the implementation of the Corporate Collective Investment Vehicle regime” and “establish a more efficient licensing regime for foreign financial service providers.”
- On May 14, 2021, the government announced a variety of measures to “attract talented individuals and exceptional businesses to Australia.”
On March 15, 2022, the Trade Ministers of Australia, India, and Japan held the second meeting of the Supply Chain Resilience Initiative (SCRI). The ministers resolved to identify key sectors for future trilateral cooperation and to develop supply chain principles for the region. The SCRI was launched on April 27, 2021, to share best practices on supply chain resilience and hold “investment promotion events and buyer-seller matching events to provide opportunities for stakeholders to explore the possibility of diversification of their supply chains.” The Ministers agreed to hold SCRI meetings once per year, with one country acting as chair each year in the order of Japan, Australia, and India.
- On May 13, 2021, the Australian government announced AU$98.8 million (US$73.2 million) over four years to “establish the Office of Supply Chain Resilience, and to support the implementation of other Government policy priorities including its COVID-19 response and continuing Australian Public Service reforms."
- On April 6, 2021, Australia and India announced the launch of the Australia India Business Exchange (AIBX), which aims to "provide businesses in both nations with market insights and connections to foster commercial partnerships that will help generate jobs and business opportunities in Australia and India." According to the Australian Trade Minister's website, Australia "will support services and technology providers to grow partnerships and build resilient supply chains in the mining, resources and infrastructure sectors."
- On May 13, 2021, the government announced a new AU$206 million (US$152 million) Patent Box Scheme to “encourage investment in Australia’s biotechnology and medical technology sectors.” Under the scheme, income from Australian medical and biotech patents will be taxed at a concessional corporate tax rate of 17 percent, rather than the standard rate of 25 to 30 percent.
- On January 21, 2020, the Australian government established the Critical Minerals Facilitation Office to provide national policy and strategic advice on critical minerals and to connect Australian critical minerals projects with investors, regulators, government financing facilities, and Australia's strategic partners.
Information and Communication Technology
- On May 14, 2021, the Australian Trade and Investment Commission introduced a Digital Games Tax Offset, which provides a 30 percent refundable tax rebate for foreign businesses looking to develop digital games in Australia.