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Author: Admin | 2025-04-28
About for inward FDI transactions. The model I used in 2012 was based on those factors likely to determine the absolute and relative rates of investment return in Australia (see Appendix).27 While my prior work was estimated over the period to the end of 2004, it can still be used as the basis for comparing actual foreign direct investment transactions with those that would have been expected conditional on the explanatory variables evolving as they did after 2004. Note that Figure 11 shows how the stock of FDI would have evolved based on transactions only, abstracting from exchange rate and other valuation effects on the existing stock of FDI.Figure 11. Actual versus expected inward foreign direct investment in AustraliaFigure 12. Foreign direct investment in Australia relative to forecastSource: Author’s calculationsSource: USSCAfter re-running the model, I determined that as of the March quarter 2020, the stock of FDI is $92.3 billion higher than would have been expected based on the model estimated to the end of 2004. While this is within the standard error of the model, it is nonetheless consistent with Australia improving its performance on inward foreign direct investment from 2005 relative to what would have been expected based on the subsequent evolution of economic fundamentals. Note that actual FDI initially underperformed expectations before exceeding those expectations from Q1 2006.It should be noted that the gap been actual and expected FDI has narrowed somewhat in recent years, as the model has over-predicted FDI inflows. This is consistent with a global slowing in FDI flows since the election of President Trump and is a trend that bears watching. While the AUSFTA contributed to an overall improvement in the foreign investment climate in Australia, a trend to slower FDI growth globally could be expected to weigh on inward FDI to Australia
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