FOREIGN INVESTMENT - NOT FINISHED!!!!

hey future hels- finish this ppt if u wanna use it:)

1. Foreign investment

   • define

   • 2 flows and describe

• flow of financial capital in and out of aus econ- associated with buying and selling of financial assets

• Inward- where aus borrows money causing inflow into aus

• Outward- when aus invests overseas causing flow out

1. International investment position formula

Foreign investment into aus - foreign invest abroad or (inflow- outflow)

2.1 Foreign debt

• define

• when does increase/decrease

1. countries borrowing and lending of money

   • increases when aus residets borrow money overseas, decreases when aus lends money overseas

   • most invest into aus is in debt as we borrow so much

2.2 Foreign equity

• define

• when does increase/decrease

1. countries buying of FOREIGN ASSETS and selling of DOMESTIC assets (outflow)

2. Increases when foreign countries buy aus assets.

3. Types of FI

1. Direct investment

2. Portfolio investment

3.1 Direct investment

• define

• how much of aus is owned overseas

• When another business/corp of someone invests in another countries assets, estabilishing a new busiiness, venture or stake in companies.

• Level of owenership must be 10% equitt or owning power

= power to vote, or influence the firms operations

• 3% of businesses have more than 10% ownership from overseas

3.1 What makes Australia attractive for FDI?

• Large mining- over 20% of aus companies have 10% + ownershup of FDI

• Close to asia pacific- meaning fast growth and increased pop

• Aus isnt corrupt in legal and gov

• Strong trade links via FTAS

• good at protecting property rights

3.2 Foreign portfolio investment

• define

• Why?

•  investment in companies shares bonds or assets but not intended to control firms (less than 10%)

• Investors look for financial rate of return to diversify investments= short term, influenced by favourable changes in exchange rate

3.3 How did Covid affect foreign DIRECT invest into Aus.

• decreased in 2019

• went from annual inflow of 60bil to outflow of 40bil caused by global recession

• returned to normal after covid

• stable because FDI is made with commitment

3.3 Why is FPI more volatile?

• changes from net inflow to outflow and VV each year due to short term commitement

• Influenced by interest rate differential

• If IRD increased= indreased demand for aus shares = increased FPI into aus

• If IRD decreased, contraction, decreased share market, or commodity prices (decrease mining profit)= decreased FPI

4. Benefits of FI

   • list them

1. increased aus investment

2. domestic prod

3. HH- decrease morgage expendicture

4. labour market-

5. new tech and managerial expenditure- new innovation

6. tax for gov- increased emplpy

4.1 Benefits of FI- aus investment

• supplements aus domestic savings to fund investment

• increased econ activity, employment and national income

• moved aus PPF outward because of increased capital

5. Supposed costs of FI

• selling of aus assets

• security risk

• increase aus debt

• crowd out residents

• decrease credit rating

• decrease in AUD

5.1 describe selling of aus assets

concern that foreign equity of aus assets may conflict with gov policies or profits siphoned back overseas

5.2 describe increase of aus debt and why its not true

• most FI is in form of borrowing= interest and etc may import burdent

• But borrowing= higher income and investment= no burden on econ as it increase produc capacity

5.3 describe crowding out residents

• FI into real estate will drive out domestic residents via increased property prices

• not true bc foreign investors cannot buy property withou being approved by foreign invest review board

6. Define foreign liabilities

• sum or stock of all FI that has flowed into aus= something owed (interest)

6. Define foreign assets

• sum/ stock of all FI that has flowed into foreign countries= something owed eg. if aus bought foreign shares

6. What is international investment position?

   • define

   • what is aus net IIP

   • and why?

• difference between FL-FA

• Aus net IIP is liability because we have more foreign investment into aus than we have overseas to boost national income and stdL