Investment

Invest Australia

Looking for a location? Australia’s strong and diverse economy provides the ideal base for expansion into the Asia-Pacific region

The Australian economy has been variously described as ‘miracle’, ‘remarkable’ and ‘the envy of the OECD’. But this miraculous performance owes less to divine intervention than to plain hard work and sound economic management.

Major reforms to Australia’s labour market, business taxation and competition policy, accompanied by strong productivity growth and low inflation, have driven the country’s economic performance. The end result has been a more open, stable and globally competitive economy.

World-leading growth
So it comes as no surprise that the World Competitiveness Yearbook 2002 has rated Australia’s economy as the world’s most resilient. Australia’s average annual GDP growth of 3.3% since 1990 has exceeded almost all other OECD countries, including the US, the UK, Canada and Germany.

The OECD’s forecast growth for Australia in 2003 is 3.2%, compared with an OECD average of just 1.9%. The outlook for Australia in 2004 is even better, with growth forecast to increase to 3.8%.

In response, international investors are taking note. Global foreign direct investment inflows to Australia more than tripled in 2002, against a 17% de-cline in flows to all OECD countries.

Contribution to GDP by industry sector, 2002

A healthy combination
According to Australia’s Treasurer, Peter Costello, Australia’s economic performance is a direct result of a combination of stable prices, a sound fiscal position, low public sector debt, strong financial systems and healthy employment growth.

The US Federal Reserve has singled out the Australian economy as one of the few to have lifted productivity growth in recent times, noting higher growth rates than those recorded in the G7 countries over the last decade. Indeed, Australia’s productivity growth reached a high of 3.8% in 2002, this compared with the OECD average of just 2%. Gary Banks, Chair of Australia’s Productivity Commission, highlights Australia’s ability to take up and invest in new technologies so as to “tap new productivity potential”.

A vote of confidence
In a vote of confidence on Australia’s financial system, international credit rating agency Standard and Poor’s upgraded Australia’s credit rating to ‘AAA’ in 2003. This follows a similar upgrade by Moody’s in 2002, which noted the benefits of stable politics, a market-oriented regulatory regime, and a pragmatic policy stance.

Resilience in diversity
Australia’s strong and diverse economy has provided a buffer to global fluctuations. Much more than a resource economy, services industries are the main stimulant of economic activity, making up almost 80% of gross domestic product (see chart). While traditional industry sectors continue to flourish, new sectors such as information and communications technology and biotechnology demonstrate leading-edge capabilities.

Australia is also well positioned to supply high-value, sophisticated services such as education, health and financial services. In fact, education is one of Australia’s fastest-growing service exports. The higher education enrolment rate in Australia, at around 80%, is the highest in the region and ranked third worldwide.

Australia also has the highest availability of IT skills in the region and is ranked in the top 10 countries in the world for the availability of skilled labour, IT professionals, finance skills and qualified engineers.

When IBM chose Sydney over Singapore for its e-Innovation Centre, Singapore’s Straits Times reported that “it is understood that Singapore offered a better incentive package in dollar terms but IBM was swayed by the large pool of experienced IT professionals in Australia”.

With Invest Australia and federal government assistance, General Motors (GM) has chosen Australia for its state-of-the-art manufacturing plant to build lightweight, fuel-efficient engines. It’s one of just two such plants in the GM world, confirming Australia’s reputation as a low-cost, high-technology auto manufacturer.

Emerging technologies
Australia’s telecommunications and IT market has grown to become one of the biggest in Asia and the 10th largest in the world, according to WITSA Digital Planet 2002.

Widespread use of mobile phones and wireless devices makes Australia the second largest market for mobile commerce in the Asia Pacific. It’s also first in the Asia Pacific for ‘e-business’ readiness, and first in the region and third in the world for the number of secure servers (EIU rankings). Australia is also recognised as an important test market for emerging technologies. Microsoft’s MD, Steve Vamos, recognises Australia’s potential and opportunity, saying: “Microsoft has been operating in Australia for almost 20 years and [it is] a very important and progressive market for information technology – Australians are early adaptors and innovators of information technology.”

Citrix Systems has a dedicated R&D centre in Australia, deciding to establish the facility after it was demonstrated that Australia’s R&D cost structure was approximately 30% less than for an equivalent US-based R&D facility.

Prime office occupation costs (US$/sq ft/year)

Culture of innovation
It’s widely recognised that Australia’s talent and a commitment to R&D are key drivers behind its success.
R&D expenditure by government agencies in Australia as a percentage of GDP is among the highest in the OECD. The ratio of researchers to labour force in Australia outranks major economies such as Germany, France, Canada and the UK, and its research organisations – such as the national scientific and research organisation, CSIRO – are world class.

‘Backing Australia’s Ability’
To position Australia at the forefront of the knowledge economy, the Australian federal government is implementing a A$3bn innovation strategy, ‘Backing Australia’s Ability’. This includes the development of world-class centres of excellence in IT and biotechnology, and significant research and development tax concessions.

Companies like GlaxoSmithKline and Unilever from the UK, Fujitsu and Toshiba from Japan, Hoechst and Siemens from Europe, and Kodak and Motorola from USA – to name just a few – are investing in Australia for its high-value, low-cost technology and innovative culture.

Cost competitive
Australia consistently emerges as a low-cost base among developed nations. Prime office space in Australian cities is often a fraction of the cost of similar properties in cities such as London, Tokyo and Singapore (see chart). Telecommunications costs are also among the lowest in the region – an international phone call in China can be five times more expensive than in Australia, for example. Australia’s electricity costs are around half the cost of those in Hong Kong and 30% lower than in Singapore.

Taxation and industrial relations reforms have also improved the cost base. The corporate tax rate has been dropped from 36% to 30%, while Australia’s overall tax burden, at 31.5%, easily falls below the OECD average of 37.4%.

Cost competitive: despite Australia’s strategic location and unsurpassed quality of life, prime office space costs far less than in other major centres

Regional engagement
Australia’s proactive engagement with the Asia Pacific provides the perfect basis from which to do business.
Its membership of APEC continues to play a significant role in Australia’s regional and economic well-being, with 70% of total exports going to APEC member economies.

This environment has opened the way for more than 800 companies to establish their Regional Headquarters or Regional Operating Centres in Australia to serve the Asia-Pacific region.

Among Australia’s most significant attractions as a base for regional headquarters is its geographic location, which creates a logical business bridge between the US and European time zones, enabling companies to conduct 24/7 ‘follow the sun’ operations, taking advantage of Australia’s low telecommunications costs.

Australia also offers a friendly, multicultural environment for investors from all over the globe, providing ease of interaction and cultural affinity for businesses servicing emerging Asian markets. Not many people realise that more Asian languages are spoken in Australia than in any other country in Asia.

Australia’s regulatory institutions are considered to be some of the most reliable, transparent and competitive in the world, providing a high degree of certainty and predictability for business planning.

This reputation for stability is a reason why, in 2002, Australia jumped into the top 10 investment destinations according to AT Kearney. And why, for anybody who has spent time in Australia, it comes as no surprise that Australia is ranked as the number one place in the world where expatriate staff want to live and work.

Number one: ex-pats rate Australia as the world’s best place to live and work

Strong business focus
The Australian government has moved to strengthen its investment attraction and facilitation efforts through Invest Australia. The organisation is dedicated to working with potential investors to provide a single coordinating entry point for facilitating their investments in Australia.

“We have rejected the ‘one size fits all’ approach”, says Invest Australia’s Chief Executive Officer Garry Draffin, “and have structured our services to ensure we take account of those interests peculiar to geographic regions, industry sectors, skills and capabilities.

“Underpinning this targeted approach is our deliberate effort to staff our 13 international offices with locally-engaged people, because they have an understanding of local culture and business, and are attuned to the market in which they are operating.

“Invest Australia, working in partnership with business and government, offers a comprehensive, free and totally confidential service to potential investors,” says Mr Draffin.

What’s next?
Australia will remain committed to a program of economic reform to ensure that it maintains its global competitiveness.

Salomon Smith Barney’s Chief Economist, Paul Brennan, has summed it up: “Australia has a good story to tell – the economy is resilient, performance over the past five years has been good in the global context, and there are good investment opportunities for overseas companies here.”

The only question remaining is, “Where are you doing business?”

Email: askus@investaustralia.gov.au
Website: www.investaustralia.gov.au/invest