Key Points:

Appetite for investment in Australia is strong, with inward FDI increasing by an average of 5.8% over the last five years.

Australia may just about have it all. Not only does Australia's land abound with nature's gifts, it can boast of making its investors the most real money over the last 111 years. According to London Business School, between 1900 and the end of last year, shares "down under" have returned their owners a real return of 7.4% each year. Is it of little wonder that Australia has been named as one of the top destinations for global investors?

Ranked in the ten most attractive locations for Foreign Direct Investment (FDI)[1], inward FDI has increased by an average of 5.8% over the last five years, and at last count inward stock was calculated at $436 billion. FDI is generally regarded as amongst the most stable forms of capital inflow because it involves a substantial commitment from investors in acquiring business facilities and creating employment and therefore brings increased competitiveness strengthening the economy further. For developed economies, the average ratio of FDI to GDP is 25%. Australia's is 36%. Pretty impressive.

Australia is certainly unique. Developed economies around the world confronted the most challenging global financial and economic conditions in 75 years. During the worst of the crisis, Australia's economy grew by 1.0%. With low levels of debt, a buoyant labour market, business and consumer confidence high, Australia's economic growth has continued to outperform. Predicted to grow to 3%, the robust nature of Australia's economy represents a safe haven for foreign investors.

Priding itself on a solid, open and progressive regulatory environment, the Foreign Investment Review Board (the FIRB) examines proposals by foreign persons to invest in Australia and makes recommendations to the Treasurer on those subject to the Foreign Acquisitions and Takeovers Act 1975 and Australia's foreign investment policy. Amounting to almost $39.1 billion, the United States of America was the largest source country for foreign investment proposals in 2009-10. Almost a quarter of all FDI in Australia comes from the United States of America. Other major source countries of approved investment in 2009-10 were the United Kingdom ($28.6 billion), China ($16.3 billion), Japan ($6.0 billion) and Switzerland ($5.9 billion).[2]

The largest number of foreign investment proposals involve the purchase of real estate. Foreign entities considering the acquisition of Australian urban real estate[3] must seek approval from the FIRB before proceeding with the acquisition, unless the transaction falls within an exempt category. In 2009-10, there were 113 approvals to purchase developed commercial real estate (shopping centres, office buildings and warehouses), a marked increase from the 71 approvals in 2008-9. The associated proposed investment was $8.6 billion which is an increase from the $5.8 billion proposed investments in 2008-9.[4]

Globally recognised brands have been quick to invest. Australia has seen the world's twelfth biggest retailer, Costco, open premises in Melbourne in August 2009. This followed German retailer Aldi's significant successful entry into the retail market; after joining the Australian market in 2001 it has opened more retail stores than both Coles and Woolworths. Apple has invested into the Australian retail scene in 2008 and has since expanded in Melbourne and the Gold Coast.

And it is not just retail. Foreign investors' appetite for Australian real estate has surged with private equity and pension funds actively targeting offices, industrial and hotels. Stamford Land Corporation (Singaporean owned) is among the top ten hotel owners in Australia.[5]

The Australian outlook certainly looks bright. A resilient economy underpinned by established, stable political governance. An energy superpower representing the world's biggest supplier of coal, second biggest supplier of uranium and fifth biggest supplier of LNG. A country with strong public finances and a sound financial system proved to be among the most successful in the world. This foreign love affair shows no signs of abating any time soon.