Boasting more than 26 years of consecutive economic growth, Australia is a country unlike any other. It houses a multicultural workforce and offers easy access to its markets for foreign workers and investors. The nation has strong and stable economic foundations, a pro-business government, and a string of globally successful industries. These high-performing industries include energy, agriculture, finance, education, and tourism.
Additionally, Australia’s global connections offer unique trade opportunities and barrier-free access to markets in Asia, Europe, and the Americas. Simply put, Australia is a strong contender for foreign investors and businesses looking to incorporate a company.
However, these successful industries aren’t the only moneymakers in Australia’s productive economy. In this article, we will explore five booming sectors that provide attractive alternative investment opportunities.
Australia´s Booming Sectors – Exploring Australia’s investment environment
Foreign direct investment flows to Australia have been strong since 2011, driven predominantly by the energy sector. According to the World Investment Report 2018 published by UNCTAD, Australia ranked eighth in the world for the total value of FDI inflows in 2017. This ranking moved up one spot higher than the previous year.
Australia ranks 18 out of 190 countries in the World Bank’s 2019 Doing business report for ease of doing business. The country is one of the most open countries for foreign direct investment among OECD-member states, with FDI representing over a third of the country’s GDP. That is thanks to its economic liberalism, stability, and transparency of its legal system. Moreover, the long history of strong economic growth compensates for its geographic isolation.
Four booming sectors
Establishing a very attractive environment for foreign investment has allowed certain Australian sectors to flourish. Rejuvenated staple sectors and up-and-comers in the country’s sturdy economy have fuelled a significant rise in foreign investment. These sectors include (figures are from 2017):
- Mining and quarrying: this sector brought in a staggering 37.1% of investments.
- Manufacturing: received 11.5% of total investments.
- Real estate activities: received 10.7% of investments.
- Wholesale and retail made up 6.5% of total investments.
Mining and quarrying
The Australian mining sector flourishes due to its richness in natural resources and high openness to international trade and business. Not surprisingly, it contributes 7% to the total GDP and about 60% of total exports. Consequently, it is the 3rd most important contributor to the Australian economy behind insurance and financial services. Furthermore, Australia is a global top 5 producer of gold and iron, while having the largest uranium reserve in the world. All in all, the country possesses the fourth largest mining sector in the world, behind Russia, China, and the US. Since 2013, Australia has been one of the main producers and exporters of natural resources.
The report of mining in Australia 2018 to 2032, forwarded by BIS Oxford Economics, forecasts that mining exploration, maintenance, and production will further increase and become targets for more investments. Mining production growth will outpace overall economic growth and garner more attention from foreign investments.
The Australian manufacturing sector includes businesses engaged in the physical or chemical transformation of materials into new products. The sector covers a range of diverse activities such as cheese making, metal smelting, and medical equipment production.
The manufacturing industry currently:
- contributes around $100 billion to Australian GDP annually
- employs around 900,000 Australians
- contributes 23.5 percent of business expenditure on research and development (R&D).
Manufacturing has strong links throughout the economy through the flow of skills, knowledge, and goods. It uses materials and services from industries such as mining and information and communications technologies. Because of its diverse application, this sector has integral ties with most of Australia’s other powerful and emerging industries.
Opportunities in Manufacturing lie not just within tried-and-true operations to service Australia’s major sectors; finding a niche that Australia is yet to explore in manufacturing technology could prove to be equally lucrative for investors.
Real estate activities
Real estate activities are mostly based upon the behavior of secondary sectors. As the office supply pipeline turns back on, Sydney and Melbourne tenants sigh with relief after a long period of tight vacancy. Increasing urbanization of these bustling cities has sparked anxiety among citizens and businesses around the scarcity of real estate for commercial purposes, and rising prices for highly-coveted space.
Over AU$4.6 billion (US$3.17 billion) was invested into Sydney and Melbourne alone in the last year, specifically to address this issue. Consequently, this relief will support thriving office real estate demand and generate new opportunities for commercial actors in innovative city-living.
Increased industrial land prices in Sydney and Melbourne will also encourage the development of multi-story warehouses in inner-city locations. The hotel sector will benefit from a weaker Australian dollar, attracting overseas tourists and keeping more Australians holidaying locally. This will see more investments by the hotel sector into renovations or new projects.
Wholesale and retail
Australia’s retail spending improved in 2018, averaging 3.0% growth compared to 2.7% in 2017. Of the six broad retail categories, the biggest improvers in 2018 were clothing, footwear, and accessories.
This improvement echoes soaring consumer confidence, which reached a 4-year high in mid-2018. Momentum in sales looks positive going into 2019. Cafes, restaurants and takeaway food maintained consistent growth as consumers continue to spend frivolously on leisure and experience-based retail such as dining out.
The importance of evolving with the structural and cyclical changes in the retail environment will become increasingly evident. Going into 2019, innovation, customer experience, and omnichannel capabilities will remain the key drivers for retailers’ success. Further modernization of retail experience (such as online shopping) continues to offer credible returns on investment as consumers continuously push for further efficacy and convenience in their day-to-day activities.
Who’s investing in Australia?
The main investing countries in Australia are the United States, the United Kingdom, Belgium, Hong Kong, Singapore, Luxembourg, the Netherlands, China, and Switzerland. These countries collectively make up more than 70% of the Australian FDI stocks.
These investments are largely oriented towards the mining sector, manufacturing, real estate, wholesale and retail trade, construction, and communication. Australia’s resources sector has traditionally been attractive for foreign investment. In recent years, the services sector has also been receiving greater attention.
Following the investment patterns of major shareholders is a surefire way to track growing and emerging sectors, and find a niche that individually-acting investors and businesses can capitalize on.
Investment legislation changes
Australia recently introduced a series of changes to its foreign investment framework by simplifying the existing regulation. The new legislation is designed to ensure that foreign investment is appropriately assessed. This way, national interest factors are properly considered.
The government supports a case-by-case approach to considering foreign investment proposals. Proposals are are assessed against a criteria that considers the country’s national interests. If an investment proposal is considered to fall outside of national interests, Australia now offers investors the chance to modify their proposal. This flexible approach is preferred against hard and fast rules and proposal rejections.
This shift demonstrates that the pro-foreign investment government seeks to minimize rigid laws which prohibit a class of investments can stop valuable investments.
Contact us for more information
It’s no secret that Australia is one of the most favorable investment locations in the world for international business. As a result, FDI in the region continues to grow and develop. These four booming sectors offer just a ‘tip of the iceberg’ insight into the Australian sectors commanding the attention of foreign investors worldwide.
At Biz Latin Hub, our experts work with diligence and a wide range of knowledge and experiences to assist companies interested in expanding their business globally.
For further advice, or to seek your own tailored market entry strategy, contact us at [email protected].