HomeReportsBureau of Economic and Business Affairs2018 Investment Climate Statements...Australia

# 					2018 Investment Climate Statements: Australia			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

Australia is generally welcoming to foreign investment as such investment is widely considered to be an essential contributor to Australia’s economic growth and productivity. The United States is the dominant source of foreign direct investment (FDI) in Australia. According to the Australian Bureau of Statistics, the stock of U.S. FDI totaled USD 146.3 billion in January 2017.

Australia runs an annual current-account deficit and, therefore, is dependent on foreign investment, both FDI and portfolio investment. Mining and resources attract by far the largest share of FDI from the United States. Real estate investment is the second largest target of FDI from the United States, although it remains much smaller than mining investment in absolute terms.

While welcoming toward FDI, Australia does apply a “national interest” test to qualifying types of investment through its Foreign Investment Review Board (FIRB) review process. Various changes to the foreign investment rules have been made in recent years, primarily aimed at strengthening national security. Further changes to investments in electricity assets and agricultural land were announced in early 2018. Under these changes, electricity infrastructure is viewed as ‘critical infrastructure’ and foreign purchases will face additional scrutiny and conditions, while agricultural land is now required to be ‘marketed widely’ to Australian buyers before being sold to a foreign buyer. Various states also announced over 2017 that they would apply surcharges to foreign investment in real estate. Under the Australia-U.S. Free Trade Agreement (AUSFTA), all U.S. greenfield investments are exempt from FIRB screening. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above AUD 1.094 billion (USD 791.6 million).

In response to federal budget deficits and a perceived lack of fairness, the Australian government has tightened anti-tax avoidance legislation that mainly affects multi-national corporations with operations in multiple tax jurisdictions. While some laws have been complementary to international efforts to address tax avoidance schemes and the use of low-tax countries or tax havens, Australia has also moved in its own direction and has gone further in its efforts than the international community. This trend will continue in 2018, with a range of government inquiries underway at the time of writing.

 

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Toward Foreign Direct Investment**

Australia is generally welcoming to foreign direct investment (FDI), with foreign investment widely considered to be an essential contributor to Australia’s economic growth. Other than certain required review and approval procedures for certain types of foreign investment described below, there are no laws that discriminate against foreign investors.

A number of investment promotion agencies operate in Australia. The Australian Trade Commission (often referred to as Austrade) is the Commonwealth Government’s national ‘gateway’ agency to support investment into Australia. Austrade provides coordinated government assistance to promote, attract and facilitate FDI, supports Australian companies to grow their business in international markets, and delivers advice to the Australian Government on its trade, tourism, international education and training, and investment policy agendas. Austrade operates through a number of international offices, with U.S. offices primarily focused on attracting foreign direct investment into Australia and promoting the Australian education sector in the United States. Austrade in the United States operates from offices in Boston, Chicago, Houston, New York, San Francisco, and Washington, DC.

In addition, state investment promotion agencies also support international investment at the state level and in key sectors. For example, Investment Attraction South Australia aims to drive inward investment for South Australia. Invest in New South Wales similarly seeks to promote New South Wales as an investment location.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

Within Australia, the right exists for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity in accordance with national legislative and regulatory practices.

See Section 4: Legal Regime – Laws and Regulations on Foreign Direct Investment below for information on Australia’s investment screening mechanism for inbound foreign investment.

Other than the screening process described in Section 4, there are few limits or restrictions on foreign investment in Australia. Foreign purchases of agricultural land greater than AUD 15 million (USD 12 million) is subject to screening. This threshold will apply to the cumulative value of agricultural land owned by the foreign investor, including the proposed purchase. However, the agricultural land screening threshold does not affect investments made under AUSFTA. The current threshold remains AUD 1.094 billion (USD 875 million) for U.S. non-government investors. Future investments made by U.S. non-government investors will be subject to inclusion on the foreign ownership register of agricultural land and are also subject to Australian Tax Office (ATO) information gathering activities on new foreign investment.

U.S. investors do not face any restrictions when investing in Australia relative to investors from other countries. All foreign persons, including U.S. investors, must notify the Australian government and receive prior approval to make investments of five percent or more in the media sector, regardless of the value of the investment.

**Other Investment Policy Reviews**

Australia has not conducted an investment policy review in the last three years through either the OECD or UNCTAD system. A WTO review of the trade policies and practices of Australia did take place however, in April 2015, and can be found at https://www.wto.org/english/tratop_e/tpr_e/tp412_e.htm .

The Australian Trade Commission compiles an annual ‘Why Australia Benchmark Report’ that presents comparative data on investing in Australia in the areas of Growth, Innovation, Talent, Location and Business. The report also compares Australia’s investment credentials with other countries and provides a general snapshot on Australia’s investment climate. See http://www.austrade.gov.au/International/Invest/Resources/Benchmark-Report .

**Business Facilitation**

Business registration in Australia is relatively straightforward and is facilitated through a number of Government web sites. The Commonwealth Department of Industry, Innovation and Science’s business.gov.au  provides an online resource and is intended as a ‘whole-of-government’ service providing essential information on planning, starting and growing a business. Foreign entities intending to conduct business in Australia as a foreign company must be registered with the Australian Securities and Investments Commission (ASIC). As Australia’s corporate, markets and financial services regulator, the ASIC web site provides information and guides on starting and managing a business or company.

In registering a business, individuals and entities are required to register as a company with the ASIC, which then gives the company an Australian Company Number, registers the company, and issues a Certificate of Registration. According to the World Bank ‘Starting a Business’ indicator, registering a business in Australia takes 2.5 days and Australia ranks 7th globally on this indicator.

The Australian Government has a range of initiatives to assist women and minority groups with establishing new businesses. At a high level, the Office for Women within the Department of Prime Minister and Cabinet promotes economic security for women, leadership for women in business, and various grants and funding for initiatives that promote women in business. Various initiatives also exist to assist indigenous Australians engage in the economy including through business creation. Guidance on setting up new businesses is also available in a range of foreign languages through the business.gov.au  website.

**Outward Investment**

Australia generally looks positively towards outward investment as a ways to grow its economy. There are no restrictions on domestic investors. Austrade, the Australian Government’s export credit agency, Efic (Export Finance and Insurance Corporation), and various other government agencies offer assistance to Australian businesses looking to invest abroad.

							2. Bilateral Investment Agreements and Taxation Treaties					

Australia is a party to bilateral investment treaties with Argentina, China, Czech Republic, Egypt, Hong Kong, Hungary, India, Indonesia, Laos, Lithuania, Mexico, Pakistan, Papua New Guinea, Peru, Philippines, Poland, Romania, Sri Lanka, Turkey, Uruguay and Vietnam.

In addition to the free trade agreement (FTA) with the United States, Australia has bilateral FTAs with Chile, China, Japan, Korea, Malaysia, Singapore, and Thailand, and a multilateral FTA with New Zealand and the countries of the Association of Southeast Asian States (ASEAN), all of which contain chapters on investment.

Australia is currently engaged in bilateral FTA negotiations with the EU, India, and Indonesia, and in the following plurilateral FTA negotiations: the Regional Comprehensive Economic Partnership (RCEP, consisting of the ASEAN + Six group of nations) and the Gulf Cooperation Council (GCC). Over 2017, Australia signed but has not yet ratified the Pacific trade and economic agreement (PACER Plus) and a bilateral FTA with Peru, and in March 2018, it signed the Comprehensive and Progressive agreement on the Trans Pacific Partnership (CPTPP).

The U.S. – Australia Convention for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes has been in place since 1982 with amendments made in 2001. In addition to the United States, Australia has income tax treaties with 44 other countries and Taiwan.

On April 28, 2014, Australia signed an Intergovernmental Agreement with the United States to implement the Foreign Account Tax Compliance Act (FATCA) and improve tax cooperation. Under FATCA, Australian financial institutions will be required to submit information on accounts held by U.S. citizens. The Intergovernmental Agreement will allow financial institutions to report the information via the Australian Tax Office under the existing Australia–US tax treaty arrangements.

The Australian government has moved aggressively in efforts to fight tax avoidance schemes by multinational corporations. In some cases, it has utilized OECD Base Erosion Profit Shifting (BEPS) recommendations but has also moved further than the BEPS recommendations. Multinational anti-avoidance legislation targets companies that do business in Australia without establishing a permanent establishment, and its diverted profits tax legislation targets tax schemes that recognize income in lower tax jurisdictions. A parliamentary inquiry into multinational tax avoidance is currently underway and will report in 2018.

							3. Legal Regime					

**Transparency of the Regulatory System**

The Australian Government utilizes transparent policies and effective laws to foster national competition and is consultative in its policy making process. The government generally allows for public comment of draft legislation and publishes legislation once it enters into force.

Regulations drafted by Australian Government agencies must be accompanied by a Regulation Impact Statement when submitted to the final decision maker (which may be the Cabinet, a Minister, or another decision maker appointed by legislation). All Regulation Impact Statements must first be approved by the Office of Best Practice Regulation (OBPR) which sits within the Department of Prime Minister and Cabinet, prior to being provided to the relevant decision maker. They are required to demonstrate the need for regulation, the alternative options available (including non-regulatory options), feedback from stakeholders, and a full cost-benefit analysis. Regulations are subsequently required to be reviewed periodically. All Regulation Impact Statements, second reading speeches, explanatory memoranda, and associated legislation are made publicly available on Government websites. Australia’s state and territory governments have similar processes when making new regulations.

The Australian Government has tended to prefer self-regulatory options where an industry can demonstrate that the size of the risks are manageable and that there are mechanisms for the industry to agree on, and comply with, self-regulatory options that will resolve the identified problem. This manifests in various ways across industries, including voluntary codes of conduct and similar agreements between industry players.

The Australian Government has recognized the impost that regulation can impose on businesses and has undertaken a range of initiatives to reduce red tape. This has included specific red tape reduction targets for government agencies, and various deregulatory groups within government agencies.

Australian accounting, legal, and regulatory procedures are transparent and consistent with international standards. Accounting standards are formulated by the Australian Accounting Standards Board, an Australian Government agency under the Australian Securities and Investments Commission Act 2001. Under that Act, the statutory functions of the AASB are to develop a conceptual framework for the purpose of evaluating proposed standards; make accounting standards under section 334 of the Corporations Act 2001, and advance and promote the main objects of Part 12 of the ASIC Act, which include reducing the cost of capital, enabling Australian entities to compete effectively overseas and maintaining investor confidence in the Australian economy. The Australian Government conducts regular reviews of proposed measures and legislative changes and holds public hearings into such matters.

**International Regulatory Considerations**

Australia is a member of the WTO, the Asia-Pacific Economic Cooperation (APEC) and became the first of Association of Southeast Nations’ (ASEAN) ten dialogue partners in 1974. While not a regional economic block, Australia’s free trade agreement with New Zealand provides for a high level of integration between the two economies with the ultimate goal of a single economic market.

Australia is a signatory to the WTO Trade Facilitation Agreement (TFA) and performs at, or close to, the frontier for all eleven OECD Trade Facilitation Indicators. For the eight indicators where it is not located at the frontier, it has significantly improved on six between 2015 and 2017. While no new legislation has been required to progress Australia’s implementation of the TFA, Australia has created a National Committee on Trade Facilitation to oversee development of new trade facilitation initiatives. Two important initiatives to date have been the creation of an Authorized Economic Operator scheme to allow approved companies to streamline imports through Australian Customs, and the creation of a ‘single window’ portal for traders seeking information on importation and permit requirements.

**Legal System and Judicial Independence**

The Australian legal system is firmly grounded on the principles of equal treatment before the law, procedural fairness, judicial precedent, and the independence of the judiciary. Strong safeguards exist to ensure that people are not treated arbitrarily or unfairly by governments or officials. Property and contractual rights are enforced through the Australian court system, which is based on English Common Law.

**Laws and Regulations on Foreign Direct Investment**

Information regarding investing in Australia can be found in Austrade’s Investor Guide at http://www.austrade.gov.au/International/Invest/Investor-guide . The guide is designed to help international investors and businesses navigate investing and operating in Australia. It is an online guide to the regulations, considerations and assistance relevant to investing in, establishing, and running a business in Australia, with direct links to relevant regulators and government agencies that relate to Australian Government regulation and available assistance.

Foreign investment in Australia is regulated by the Foreign Acquisitions and Takeovers Act 1975 and Australia’s Foreign Investment Policy. The Foreign Investment Review Board (FIRB), a division of Australia’s Treasury, is a non-statutory body established to advise the Treasurer and the Commonwealth Government on Australia’s foreign investment policy and its administration. The FIRB screens potential foreign investments in Australia above threshold values, and based on advice from the FIRB, the Treasurer may deny or place conditions on the approval of particular investments above that threshold on national interest grounds. Following a number of recent investments made by foreign companies in key sectors of Australia’s economy, the laws and regulations governing foreign direct investment have been subject to a wide ranging and ongoing review.

The Australian Government has a ‘national interest’ consideration in reviewing foreign investment applications.

In January 2017, the Government established the Critical Infrastructure Centre (CIC) to better manage the risks to Australia’s critical infrastructure assets. A key role of the CIC is to advise the FIRB on risks associated with foreign investment in infrastructure assets, particularly telecommunications, electricity, water and port assets. While the CIC’s role in the foreign investment process signals the Government’s focus on these assets, its role is limited to providing advice to the Government and the approval framework itself was not changed when the CIC was established. Further changes to investments in electricity assets and agricultural land were announced in early 2018. Under these changes, electricity infrastructure is formally viewed as ‘critical infrastructure’ and foreign purchases will face additional scrutiny and conditions, while agricultural land is now required to be ‘marketed widely’ to Australian buyers before being sold to a foreign buyer. Various states also announced over 2017 that they would apply surcharges to foreign investment in real estate.

Under the Australia-United States Free Trade Agreement (AUSFTA), all U.S. greenfield investments are exempt from FIRB screening. U.S. investors require prior approval if acquiring a substantial interest in a primary production business valued above AUD 1.094 billion (USD 791.6 million).

**Competition and Anti-Trust Laws**

The Australian Competition and Consumer Commission (ACCC) enforces the *Competition and Consumer Act 2010* and a range of additional legislation, promotes competition, fair trading and regulates national infrastructure for the benefit of all Australians. The ACCC plays a key role in assessing mergers to determine whether they will lead to a substantial lessening of competition in any market. ACCC also engages in consumer protection enforcement and has expanded responsibilities to monitor digital industries and the “sharing economy.”

**Expropriation and Compensation**

Private property can be expropriated for public purposes in accordance with Australia’s constitution and established principles of international law. Property owners are entitled to compensation based on “just terms” for expropriated property. There is little history of expropriation in Australia although a few U.S. investors have claimed certain commercial disputes should be considered expropriation. (See below description.)

**Dispute Settlement**

*ICSID Convention and New York Convention*

Australia is a member of the International Centre for the Settlement of Investment Disputes (ICSID Convention) and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards. The International Arbitration Act 1974 governs international arbitration and the enforcement of awards.

*Investor-State Dispute Settlement*

Investor-State Dispute Settlement (ISDS) is included in some but not all of Australia’s 21 BITs and 9 FTAs. AUSFTA establishes a dispute settlement mechanism for investment disputes arising under the Agreement. However, AUSFTA does not contain an investor-state dispute settlement (ISDS) mechanism that would allow individual investors to bring a case against the Australian government. Regardless of the presence or absence of ISDS mechanisms, there is no history of extrajudicial action against foreign investors in Australia.

In 2010, an Australian company with approximately 30 percent U.S. institutional investor ownership acquired an Australian mining company for the purpose of obtaining the latter company’s primary asset, a coal exploration license. The New South Wales (NSW) government had legally approved the purchase. Subsequent to the purchase, however, the NSW Independent Commission Against Corruption (ICAC), a non-judicial anti-corruption entity with sweeping powers of investigation but no independent powers to prosecute, determined that the original Australian company had corruptly obtained the license. Based on the ICAC findings, the NSW government passed legislation cancelling the license, denying the investors the ability to seek compensation, and preventing the NSW government from having any liability for its past conduct. The result of these actions is the investors of the acquiring company, including the U.S. investors, have lost their entire investment.

*International Commercial Arbitration and Foreign Courts*

Australia has an established legal and court system for the conduct or supervision of litigation and arbitration, as well as alternate dispute resolutions. Australia is a leader in the development and provision of non-court dispute resolution mechanisms. It is a signatory to all the major international dispute resolution conventions and has organizations that provide international dispute resolution processes.

**Bankruptcy Regulations**

Bankruptcy is a legal status conferred under the Bankruptcy Act 1966 and operates in all of Australia’s States and Territories. Only individuals can be made bankrupt and not businesses or companies. Where there is a partnership or person trading under a business name, it is the individual or individuals who make up that firm that are made bankrupt. Companies cannot become bankrupt under the Bankruptcy Act though similar provisions (called administration and winding up) exist under the Corporations Act 2001. Bankruptcy is not a criminal offense in Australia.

Creditor rights are established under the Bankruptcy Act 1966, the Corporations Act 2001, and the more recent Insolvency Law Reform Act 2016. The latter legislation commenced in two tranches over 2017 and aims to increase the efficiency of insolvency administrations, improve communications between parties, increase the corporate regulator’s oversight of the insolvency market, and ‘improve overall consumer confidence in the professionalism and competence of insolvency practitioners’. Under the combined legislation, creditors have the right to: request information during the administration process, give direction to a liquidator or trustee, appoint a liquidator to review the current appointee’s remuneration, and remove a liquidator and appoint a replacement.

Four credit monitoring authorities operate in the Australian market: Equifax, Dun and Bradstreet, Experian, and the Tasmanian Collection Service. The information that can be provided to, and used by, these bodies is restricted by the Privacy Act 1988 and the associated Privacy (Credit Reporting) Code 2014. Current policy seeks to balance the privacy rights of individuals and the depth of information available to credit providers. Until 2018, credit reporting in Australia has consisted only of ‘negative’ reporting, however, in July 2018 the Government will require that credit providers also report ‘positive’ information on individuals’ credit history.

							4. Industrial Policies					

**Investment Incentives**

The Commonwealth Government and state and territory governments provide a range of measures to assist investors with setting up and running a business and undertaking investment. Types of assistance available vary by location, industry, and the nature of the business activity. Austrade provides coordinated government assistance to attracting FDI and is intended to serve as the national point-of-contact for investment inquiries. State and Territory Governments similarly offer a suite of financial and non-financial incentives. Australian and State and Territory Governments provide selected grants to businesses for establishing or expanding a business, or for specific activities such as research. The Commonwealth Government also provides incentives for companies engaging in research and development (R&D), and delivers a tax offset for expenditure on eligible R&D activities undertaken during the year. R&D activities conducted overseas are also eligible under certain circumstances, and the program is jointly administered by AusIndustry (Government agency) and the Australian Taxation Office (ATO).

**Foreign Trade Zones/Free Ports/Trade Facilitation**

Australia does not have any free trade zones or free ports.

**Performance and Data Localization Requirements**

As a general rule, foreign firms establishing themselves in Australia are not subject to local employment or forced localization requirements, performance requirements and incentives, including to senior management and board of directors. Proprietary companies must have at least one director resident in Australia, while public companies are required to have a minimum of two resident directors. See Section 12 below for further information on rules pertaining to the hiring of foreign labor.

Under the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2015, telecommunications service providers are required to retain and secure, for two years, telecommunications data (not including content); to protect retained data through encryption; and to prevent unauthorized interference and access. The Bill limits the range of agencies that are able to access telecommunications data and stored communications, establishes a “journalist information warrants regime.” Australia’s Personally Controlled Electronic Health Records Act prohibits the transfer of health data out of Australia in some situations.

Australia has a strong framework for the protection of IP, including software source code. Foreign providers are not required to provide source code to the Government in exchange for operating in Australia. The Government has indicated that it will introduce legislation to Parliament over 2018 that will require encrypted messaging services to provide decrypted communications to the Government for selected national security purposes. Current government enquiries are also investigating the competition impacts of digital platforms, including the market implications of the algorithms used by these platforms.

Companies are generally not restricted in terms of how they store or transmit data within their operations. The exception to this is the Personally Controlled Electronic Health Records Act (2012) which does require that certain personal health information is stored in Australia. The Privacy Act (1988) and associated legislation places restrictions on the communication of personal information between and within entities, however, the requirements placed on international companies, and the transmission of data outside of Australia, are not treated differently under this legislation. Finally, Australia’s data retention laws require telecommunications companies and internet service providers to retain customer metadata for a period of two years. The Australian Attorney-General’s Department is the responsible agency for most legislation relating to data and storage requirements.

							5. Protection of Property Rights					

**Real Property**

A strong rule of law protects property rights in Australia and operates against corruption. Mortgages exist and foreigners are allowed to buy real property subject to certain registration and approval requirements. Property lending may be securitized and Australia has one of the most highly developed securitization sectors in the world. Beyond the private sector property market, securitization products are being developed to assist local and state government financing. Australia has no legislation specifically relating to securitization, although issuers are governed by a range of other financial sector legislation and disclosure requirements.

**Intellectual Property Rights**

Australia generally provides strong intellectual property rights (IPR) protection and enforcement through legislation that, among other things, criminalizes copyright piracy and trademark counterfeiting. Australia is not listed in USTR’s Special 301 report or on USTR’s notorious market report.

Enforcement of counterfeit goods is overseen by the Australian Department of Home Affairs through the Notice of Objection Scheme, which allows the Australian Border Force to seize goods suspected of being counterfeit. Penalties for sale or importation of counterfeit goods include fines and up to five years imprisonment. The Australia Border Force reported seizing 190,000 individual items of counterfeit and pirated goods, worth approximately AUD 16.9 million, during the fiscal year ending June 30, 2016, the last available year for which this data is provided.

IP Australia is the responsible agency for administering Australia’s responsibilities and treaties under the World Intellectual Property Organization (WIPO). Australia is a member of a range of treaties developed through WIPO. Australia does not have specific legislation relating to trade secrets, however, common law governs information protected through such means as confidentiality agreements or other means of illegally obtaining confidential or proprietary information.

Australia was an active participant in the Anti-Counterfeiting Trade Agreement (ACTA) negotiations and signed ACTA in October 2011. It has not yet ratified the agreement. ACTA would establish an international framework to assist Parties in their efforts to effectively combat the infringement of intellectual property rights, in particular the proliferation of counterfeiting and piracy.

Under the AUSFTA, Australia must notify the holder of a pharmaceutical patent of a request for marketing approval by a third party for a product claimed by that patent. U.S. and Australian pharmaceutical companies have raised concerns that unnecessary delays in this notification process restrict their options for action against third parties that would infringe their patents if granted marketing approval by the Australian Therapeutic Goods Administration.

The Australian Parliament introduced two amendments to the Copyright Act in 2017. On June 15 2017 the Australian Parliament passed the Copyright Amendment (Disabilities and Other Measures) Bill 2017, followed in December by the introduction of the Copyright Amendment (Service Providers) Bill 2017. This latter legislation remains before the Senate. It extends safe harbor provisions in the Act to the disability, education, library, archive and cultural sectors, protecting organizations in these sectors from legal liability where they can demonstrate that they have taken reasonable steps to deal with copyright infringement by users of their online platforms. However, the legislation specifically excluded online platforms such as Google and Facebook from safe harbor provisions. The Government of Australia has indicated that it will consider further extending the safe harbor provisions to include online platforms.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

The Australian Government takes a favorable stance towards foreign portfolio investment with no restrictions on inward flows of debt or equity. Indeed, access to foreign capital markets is crucial to the Australian economy given its relatively small domestic fixed income markets. Australian capital markets are generally efficient and are able to provide financing options to businesses. While the Australian equity market is one of the largest and most liquid in the world, non-financial firms do face a number of barriers in accessing the corporate bond market. Large firms are more likely to use public equity and smaller firms more likely to use retained earnings and debt from banks and intermediaries. Australia’s corporate bond market is relatively small, and Australia is one of only two countries with insufficiently large Government debt issuance to enable domestic banks to meet their requirements under the Basel III regulations. Foreign investors are able to get credit on the local market on market terms.

**Money and Banking System**

Australia’s banking system is robust, highly evolved, and international in focus. Bank profitability is strong and has been supported by further improvements in asset performance.

Total assets of the four largest banks is US$296 billion, approximately 67 percent of total financial sector assets and 21 percent of the market value of all listed Australian companies. According to Australia’s Central Bank (the Reserve Bank of Australia or RBA), the ratio of non-performing assets to total loans was just under 1 percent at the end of 2017, having remained at around that level for the last four years after falling from highs of nearly 2 percent following the Global Financial Crisis. The RBA is responsible for monitoring and reporting on the stability of the financial sector, while the Australian Prudential Regulatory Authority (APRA) monitors individual institutions. Foreign banks are allowed to operate as a branch or a subsidiary in Australia. Australia has generally taken an open approach to allowing foreign companies to operate in the financial sector, largely to ensure sufficient competition in an otherwise small domestic market.

The RBA is responsible for monitoring and regulating payments systems in Australia. It has overseen the creation of the New Payments Platform that came online in early 2018, allowing fast processing of low value transactions. The Australian Government and RBA have investigated opportunities for using blockchain technologies in the financial sector. Private sector blockchain solutions are also being developed, including the announcement that the Australian Stock Exchange’s clearing solution will be replaced by a distributed ledger system. Governments at both the federal and state levels have sought to encourage the development of a local fintech industry, with assistance including supporting regulatory changes and in-kind assistance. Developments in these alternative payment systems remain nascent and the vast majority of transactions continue to be carried out through existing centrally-maintained payment platforms.

**Foreign Exchange and Remittances**

*Foreign Exchange*

The Commonwealth Government formulates exchange control policies with the advice of the Reserve Bank of Australia (RBA) and the Treasury. The RBA, charged with protecting the currency, has the authority to implement exchange controls, although there are currently none in place.

The Australian dollar is a fully convertible and floating currency. The Commonwealth Government does not maintain currency controls or limit remittances. Such payments are processed through standard commercial channels, without governmental interference or delay.

*Remittance Policies*

Australia does not limit investment remittances.

**Sovereign Wealth Funds**

Australia’s sovereign wealth fund, the Future Fund, is a financial asset investment fund owned by the Australian Government. The Fund’s objective is to enhance the ability of future Australian Government’s to discharge unfunded superannuation (pension) liabilities expected after 2020, when an ageing population is likely to place significant pressures on Government finances. As a founding member of the International Forum of Sovereign Wealth Fund (IFSWF), the Future Fund’s structure, governance and investment approach is in full alignment with the Generally Accepted Principles and Practices for Sovereign Wealth Funds (the ‘Santiago principles’).

In addition to the Future Fund, the Australian government has a number of ‘nation-building funds’, a Disability Care Fund, and a Medical Research Future Fund. A Building Australia Fund enhances the Commonwealth’s ability to make payments in relation to the creation or development of transport, communications, energy, and water infrastructure and in relation to eligible national broadband matters. An Education Investment Fund makes payments in relation to the creation or development of higher education infrastructure, research infrastructure, vocational education and training infrastructure, and eligible education infrastructure. A DisablityCare Australia Fund aims to reimburse States, Territories and the Commonwealth for expenditure incurred in relation to the National Disability Insurance Scheme Act 2013 and to fund implementation of that Act in its initial period of operation. A Medical Research Future Fund provides grants of financial assistance to support medical research and medical innovation.

As of December 31, 2017, the value of the Future Fund totaled AUD 138.9 billion. The value of the Education Investment Fund totaled AUS$3.8 billion; the Building Australia Fund totaled AUS$3.8 billion; the DisabilityCare Australia Fund totaled AUD 10.4 billion, and the Medical Research Future Fund totaled AUS$7.0 billion.

							7. State-Owned Enterprises					

In Australia, the term used for a Commonwealth Government State-Owned Enterprise (SOE) is government business enterprise (GBE). According to the Department of Finance, there are eight GBEs: two corporate Commonwealth entities and six Commonwealth companies. (See https://www.finance.gov.au/resource-management/governance/gbe/ ) Private enterprises are generally allowed to compete with public enterprises under the same terms and conditions with respect to markets, credit, and other business operations, such as licenses and supplies. Public enterprises are not generally accorded material advantages in Australia. Remaining GBEs do not exercise power in a manner that discriminates against or unfairly burdens foreign investors or foreign-owned enterprises.

**Privatization Program**

Australia does not have a formal and explicit national privatization program. Individual state and territory governments may have their own privatization programs. Foreign investors are welcome to participate in any privatization programs subject to the rules and approvals governing foreign investment.

							8. Responsible Business Conduct					

There is general business awareness and promotion of responsible business conduct in Australia. The Commonwealth Government states that companies operating in Australia and Australian companies operating overseas are expected to act in accordance with the principles set out in the OECD Guidelines for Multinational Enterprises and to perform to the standards they suggest. In seeking to promote the OECD Guidelines, the Commonwealth Government maintains a National Contact Point (NCP), the current NCP being currently the General Manager of the Foreign Investment and Trade Policy Division at the Commonwealth Treasury, who is able to draw on expertise from other government agencies through an informal inter-governmental network. An ANCP Web site links to the ‘OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas’ noting that the objective is to help companies respect human rights and avoid contributing to conflict through their mineral sourcing practices. The Commonwealth Government’s export credit agency, the Export Finance and Insurance Corporation, also promotes the OECD Guidelines as the key set of recommendations on responsible business conduct addressed by governments to multinational enterprises operating in or from adhering countries.

Australia began implementing the principles of the Extractive Industries Transparency Initiative (EITI) in 2016.

RBC is still an emerging concept and practice, and building institutional awareness and support for RBC remains an ongoing process. There is no formal approach to RBC at the national level. A number of independent NGOs and associations exist to promote and monitor RBC.

							9. Corruption					

Australia maintains a comprehensive system of laws and regulations designed to counter corruption. In addition, the government procurement system is generally transparent and well regulated. Corruption has not been a factor cited by U.S. businesses as a disincentive to investing in Australia, or to exporting goods and services to Australia.

Non-governmental organizations interested in monitoring the global development or anti-corruption measures, including Transparency International, operate freely in Australia, and Australia is perceived internationally as having low corruption levels.

Australia is an active participant in international efforts to end the bribery of foreign officials. Legislation exists to give effect to the anti-bribery convention stemming from the OECD 1996 Ministerial Commitment to Criminalize Transnational Bribery. Legislation explicitly disallows tax deductions for bribes of foreign officials. At the Commonwealth level, enforcement of anti-corruption laws and regulations is the responsibility of the Attorney General’s Department.

The Attorney-General’s Department plays an active role in combating corruption through developing domestic policy on anti-corruption and engagement in a range of international anti-corruption forums. These include the G20 Anti-Corruption Working Group, APEC Anti-Corruption and Transparency Working Group, and the United Nations Convention against Corruption Working Groups. Australia is a member of the OECD Working Group on Bribery and a party to the key international conventions concerned with combating foreign bribery, including the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions (Anti-Bribery Convention).

Under Australian law, it is an offense to bribe a foreign public official, even if a bribe may be seen to be customary, necessary or required. The maximum penalty for an individual is 10 years imprisonment and/or a fine of USD 1.4 million. For a corporate entity, the maximum penalty is the greatest of: 1) USD 14.4 million; 2) three times the value of the benefits obtained; or 3) 10 percent of the previous 12-month turnover of the company concerned.

A number of national and state-level agencies exist to combat corruption of public officials and ensure transparency and probity in government systems. The Australian Commission for Law Enforcement Integrity (ACLEI) has the mandate to prevent, detect and investigate serious and systemic corruption issues in the Australian Crime Commission, the Australian Customs and Border Protection Service, the Australian Federal Police, the Australian Transaction Reports and Analysis Center, the CrimTrac Agency, and prescribed aspects of the Department of Agriculture.

An Independent Commission Against Corruption (ICAC) operates in New South Wales to investigate, expose and minimize corruption in the NSW public sector. Similarly, South Australia’s Office for Public Integrity and the Independent Commissioner Against Corruption (SAICAC) is tasked with identifying corruption in public administration and investigating and referring for prosecution where appropriate. SAICAC’s jurisdiction extends to all South Australian public administration including state and local government agencies and officers, Members of Parliament, members of the judiciary, statutory authorities, and the police.

**UN Anticorruption Convention, OECD Convention on Combatting Bribery**

Australia has signed and ratified the United Nations Convention against Corruption, and is a signatory to the OECD Anti-Bribery Convention.

**Resources to Report Corruption**

Corruption and Crime Commission86 St Georges TerracePerth, Western AustraliaTel. (08) 9215 4888info@ccc.wa.gov.au

Independent Commission against Corruption NSWLevel 7, 255 Elizabeth StreetSydney NSW 2000Australia02 8281 5999 (Australia)icac@icac.nsw.gov.au

							10. Political and Security Environment					

Political protests (e.g., rallies, demonstrations, marches, public conflicts between competing interests) form an integral, though generally minor, part of Australian cultural life. Such protests rarely degenerate into violence.

							11. Labor Policies and Practices					

Australia’s strong economy has seen unemployment fall to relatively low levels, albeit remaining above levels associated with full employment. As of April 2018 the employment rate in Australia is at 5.6 percent. The labor market has grown strongly in 2017 in particular, adding around 400,000 new position, or 3.5 percent of the total workforce. This has been aided by growth in the participation rate, now sitting at close to record levels. Participation has been driven in large part by greater numbers of women entering the workforce, with female participation sitting at all-time highs of just under 61 percent (male participation remains higher at 71 percent). Participation in the labor force is lower for younger workers, with only 68 percent of those aged 15-24 in the workforce, relative to 78 percent for those aged 15-64. In 2016 just under 9 percent of youth are not in employment, education or training.

The Australian Government and its state counterparts are active in assessing and forecasting labor skills gaps across industries. Tertiary education is subsidized by both levels of governments and these subsidies are based in part on an assessment of the skills needed by industry. These assessments also inform immigration policy through the various working visas and associated skilled occupation lists.

Immigration has always been an important source for skilled labor in Australia. The Department of Home Affairs publishes an annual list of occupations with skill shortages to be used by potential applicants seeking to work in Australia. The visas available to applicants, and length of stay allowed for, differ by occupation. The main working visa is the Temporary Skills Shortage visa (subclass 482) which replaced the former subclass 457 visa in March 2018. Applicants must have a nominated occupation when they apply which is applicable to their circumstances, and applications are subject to local labor market testing rules. These rules preference the hiring of Australian labor over foreign workers so long as local workers can be found to fill the advertised job.

In March 2018 the Government announced a one year trial of a new visa category aimed to provide companies with access to highly skilled international professionals. This visa is eligible to listed companies, companies with turnover greater than AUD 4 million, or recognized startup companies, paying the foreign worker AUD 180,000 or more.

Most Australian workplaces are governed by a system created by the Fair Work Act 2009. Enterprise bargaining takes place through agreements, collective agreements made at an enterprise level between employers and employees about terms and conditions of employment. Such agreements are widely used in Australia. A Fair Work Ombudsman assists employees, employers, contractors and the community to understand and comply with the system. The Fair Work Act 2009 establishes a set of clear rules and obligations about how this process is to occur, including rules about bargaining, the content of enterprise agreements, and how an agreement is made and approved. Unfair dismissal laws also exist to protect workers who have been unfairly fired from a job. Australia is a founding member of the International Labour Organization and has ratified 58 of the ILO’s conventions.

Chapter 18 of the Australia-U.S. FTA deals with labor market issues. The Chapter sets out the responsibilities of each party, including the commitment of each country to uphold its obligations as a member of the International Labor Organization (ILO) and the associated ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up (1998).

There were 154 industrial disputes in 2017, a 39 percent reduction from 2015.

							12. OPIC and Other Investment Insurance Programs					

The Overseas Private Investment Corporation excludes Australia, as it is not a developing country. The U.S. Export-Import Bank (Ex-Im) can provide financing and other services for major resource sector and energy projects in Australia which support U.S. jobs and exports.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

 

*Table 3: Sources and Destination of FDI*

 

*Table 4: Sources of Portfolio Investment*

							14. Contact for More Information					

U.S. EmbassyMoonah Place, Yarralumla, ACT61 2 6214 5874usrsaustralia@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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