Foreign investment into Australia in January-March 2023; trends and implications

Cooper Greenberg, Samy Mansour, David Landy, Andrew Hay and Mariam Azzo
04 Aug 2023
Time to read: 2.5 minutes

Foreign investment in Australia has decreased significantly in Q3 (the January 2023 quarter) including both the number of investment proposals made and the average value of each proposal – highlighting the volatility in foreign investment quarter to quarter.

The latest quarterly report on foreign investment in Australia from the Treasury reveals some interesting changes over the period 1 January 2023 to 31 March 2023(Q3).

Australia's top investors

The United Kingdom was the top source of commercial investments into Australia for Q3 ($4.2 billion), followed by the Netherlands ($3.6 billion). The United States, which was the top source of investments for the preceding two quarters, was third in value in this quarter ($3.3 billion – a quarterly decrease of over $13 billion from Q2), followed by Malaysia ($2.7 billion) and Canada ($2.2 billion) rounding out the top five.

As identified in the table below, both the order of the countries with the highest value of approved commercial investments in Australia and the value of the investments themselves, changed significantly in Q3. Notably, China and South Korea dropped out of this quarter’s top ten sources of investment (being second and fourth, respectively, in Q2), but they still remain in the top ten for 2022-23 YTD for approved value of commercial investment proposals.

The total value of commercial investment proposals in Q3 was down by over 50% to $29.3 billion ($58.7 billion in Q2), reflecting the volatility in foreign investments quarter to quarter.

Investment sources Q1 July 2022 quarter

United States ($11.5b)

Canada ($6.7b)

Singapore ($4.8b)

China ($1.7b)

UK ($1.1b)

Japan ($0.8b)

South Korea ($0.4b)

Spain ($0.2b)

Czech Republic ($0.1b)

Qatar ($0.0b)

Investment sources Q2 October 2022 quarter

United States ($16.7b)

China ($6.7b)

Singapore ($5.2b)

South Korea ($4.2b)

Canada ($3.8b)

Spain ($1.7b)

UK ($0.7b)

Qatar ($0.6b)

Czech Republic ($0.6b)

Japan ($0.6b)

Investment sources Q3 January 2023 quarter 

UK ($4.2b)

Netherlands ($3.6b)

United States ($3.3b)

Malaysia ($2.7b)

Canada ($2.2b)

UAE ($1.1b)

Japan ($0.9b)

New Zealand ($0.9b)

Singapore ($0.8b)

Germany ($0.4b)

2022-23 YTD (ie Q1+Q2+Q3)

United States ($31.5b)

Canada ($12.7b)

Singapore ($10.8b)

China ($8.4b)*

UK ($6.0b)

South Korea ($4.6b)*

Netherlands ($4.6b)

Malaysia ($3.7b)

Japan ($2.3b)

New Zealand & UAE ($2.0b)

* indicates approximate value as Q3 figures are not available

Investment by industry sector

Reflecting another change from the preceding two quarters, commercial real estate was not the most popular industry sector by value in Q3. Finance and insurance was the most popular ($12.5 billion) despite falling from $12.9 billion in Q2. Services was second ($7.7 billion) and commercial real estate was third ($5.6 billion – a decrease of over 70% from Q2). In fourth, and also encountering a significant drop in investment, was manufacturing, electricity & gas, falling from $12.9 billion in Q2 to $1.8 billion in Q3.

Approved Investments

Consistent with previous reductions in approvals during the Christmas and summer holiday period each year, there was a decrease in investment approvals from the previous two quarters. Of commercial investment proposals, 272 were approved in Q3 as compared with 404 approvals in Q1 and 337 in Q2.

Of these 272 approved commercial investment proposals, 103 were approved with conditions. By their monetary value, nearly 80% of these investment approvals had conditions imposed on them for the quarter ($23.4 billion out of $29.3 billion). This is compared against approximately 75% and 73% conditional approval for Q2 and Q1 respectively.

Withdrawn applications

30 commercial investment proposals were withdrawn in Q3 (a proportion of approximately 11%). A slight uptick compared to Q1 and Q2.

National security applications

Of the 272 approved commercial foreign investment proposals in Q3, 28 applications related to national security actions (20 mandatory and 8 voluntary). This equals the same number of national security applications as in Q2, albeit a higher proportionate percentage.

Processing times

In Q3, 42 days was the median processing time for approved commercial investment proposals. This was an increase from the median processing time of 38 days in Q2, but a decrease from the median of 52 days in 2021-2022 and 51 days in 2020-2021. Seventy percent of approvals were considered in less than 60 days, including 33% in 30 or less days – a comparable percentage to that of Q2. However, this is greater than 59% in 2021-22 and 57% in 2020-21, so processing times do appear to be improving.

Key takeaways

Generally speaking:

  • direct foreign investment into Australia is significantly down in Q3, but is only slightly down when compared with FY 2022-23; and
  • the majority of all approvals still exceed the statutory period for review.

The next quarterly report will be published in August 2023.

If you would like to know more about how your foreign investment application could be affected by these trends, please contact us.

Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.