The key attributes that make Australia a global investment hot spot
05 Jun 2019
- Australian Economy
- International Investment
I recently reported on Australia’s
for attracting investment from overseas. But what keeps the money coming?
What makes Australia outperform as an investment destination in the
One big reason is governance. Healthy oversite institutions make our
markets fair and transparent .
Also, Australia’s ‘Triple A’ credit rating helps make us a low-risk
economy. Third, our corporate regulations strike a careful balance between
legal security and commercial freedom.
But there’s another side to Australia’s success: economic freedom, and the
general ease of doing business. This blog post will analyse how Australia
stacks up in the global rankings for governance and economic freedom. And I
will show how Australia’s performance makes us a rock-solid destination for
investors in the Asia-Pacific region.
Australia scores 5th place for economic freedom
The Heritage Foundation, a U.S.-based research organisation, rates
Australia fifth in the world for economic freedom, according to its 2019 Index 
. Established in 1994, the Economic Freedom Index tracks the relative
freedom of labour and capital across the world. This year, Australia ranks
well above most major economies including the UK (7th globally),
Canada (8th), the US (12th), Germany (24th), Japan (30th) and France (71st).
This is an important result. It indicates that Australia’s free market
democracy facilitates vibrant entrepreneurial development. According the
2019 Index publication:
‘Australia’s regulatory environment is one of the world’s most
transparent and efficient, and is highly conducive to entrepreneurship.
The labour market is well supported by the modern and flexible
Top marks for global governance
According to the IMD World Competitiveness Center  (see below), Australia scores highly in some of the key metrics for
governance. In particular, Australia is highly rated in terms of central
bank policy (8th globally), rule of law (8th) and
equal opportunity (10th).
Australia’s economic growth is viewed as one of the world’s most stable,
while the overall risk relating to the investment environment is among the
lowest (11th globally).
According to World Economic Forum data (see below), Australia has one of
the world’s most independent judicial systems (7th). This is
important, since it measures the degree to which there is fair competition
between local and foreign companies.
As reported in our most recent Benchmark Report, Australia outranks the US,
the UK and Japan in most metrics of business efficiency and environment.
Across the Asia-Pacific, the only economies that generally match
Australia’s performance in terms of efficiency and competitiveness are Hong
Kong and Singapore.
Australia’s pro-business policies pay off
The World Bank has also published a global comparative index on the
ease of doing business
in countries around the world. In 2019, Australia is ranked 18th out of 190
economies – and sixth when compared to economies with a similar or larger
According to the report, it only takes around 2.5 days and three procedures
to start a business. The country also ranks particularly well for enforcing
contracts (5th globally), getting credit (8th) and
dealing with construction permits (9th) (see chart below).
Again, what’s interesting is how well Australia compares to its peers in
the Asia-Pacific region. Among all the metrics for ease of doing business,
only Singapore, Hong Kong and South Korea perform markedly better in the
Asia-Pacific region. Australia out-performs Thailand, Japan, China,
Vietnam, Indonesia and the Philippines.
So, Australia’s ability to attract foreign direct in investment rests on
rock solid foundations. Australia successfully balances strong governance
with an open economy. But the country’s great achievement is to do it in a
way that puts us near the top of global and regional rankings in each of
the different factors that contribute to this delicate, evolving balance.
For example, the Australian Prudential Regulation Authority (APRA) and
Australian Securities and Investments Commission (ASIC).
Index of Economic Freedom
was released in January 2019 after Austrade’s 2019 Benchmark Report was completed late December.
World Competitiveness Yearbook