Australia — Outbound FDI rises but reorientates away from ASEAN
Global foreign direct investment (FDI) flows fell 7% to US$1.4 trillion in 2023, continuing a declining trend and remaining below pre-pandemic levels for the second straight year. More than two-thirds of OECD economies recorded lower FDI inflows, while inflows into non-OECD economies also dropped. In particular, FDI flows into China fell to record lows in 2023, a trend that has continued in early 2024, amid ongoing geopolitical tensions and a domestic economic slowdown.
Consistent with the global trend, while Australia’s outbound foreign investment stock continued to rise in 2023—reaching more than $3.8 trillion, of which $1 trillion was FDI—the pace of increase slowed. The US, UK and European Union remained the largest destinations for Australia’s outbound foreign investment, totalling $2.4 trillion or 62% of Australia’s investment abroad (including direct, portfolio and other investments). Australia’s investment in Asia has doubled over the past ten years to more than $450 billion in 2023, but is just 12% of total outbound investment stock. Notably, the value of Australia’s direct investment into ASEAN is small and has declined as a proportion of total outbound direct investment at a time when ASEAN has been receiving a growing share of FDI from across the world (Chart).
To that end, Australia’s Southeast Asia Economic Strategy to 2040 focuses on boosting Australian investment and exports to the region. Southeast Asia’s consuming class (earning US$15,000 per annum or more) is forecast to reach over 150 million in 2040—14 times the size of Australia. The region has a large youthful population, is urbanising and developing infrastructure, and remains focused on removing impediments to doing business. Decarbonisation and digital uptake are other notable trends that offer Australian investment and export opportunities—from traditional resources, clean energy metals and minerals, healthcare, food and beverages and services including tourism, education, government and professional services.
