Foreign Direct Investment in Australia Essay Example | Topics and Well Written Essays - 2000 words

Foreign Direct Investment in Australia - Essay Example Demand for goods and services in the Pilbara's state, Western Australia, grew by 11% in 2007. Studies have touted the benefits of foreign direct investment. (China Elections and Governance, May 8, 2008). Chinese investment in Australia's iron-ore business is increasing. Gindalbie, an Australian iron-ore miner, and Ansteel, a Chinese steelmaker, agreed to invest A$1.8 billion in a joint venture to develop a mine in Western Australia in 2007. This new investment translates to5,000 new jobs. (China Elections and Governance, May 8, 2008) Foreign direct investment (FDI) should be free from the strict controls which are implemented by host governments. (Main Idea Statement). Foreign direct investment has speeded up the economic development of Australia. If the foreign direct investment in the iron ore and coal mining sector continues, Western Australia will need an extra 400,000 workers within 10 years ding to the Australian Chamber of Commerce. Australia has entered its 17th year of uninterrupted growth. The pace of domestic demand that monetary authorities have pushed interest rates to their highest in close to 12 years in order to combat inflation. Inflation has been identified as the country's chief economic ill. Skills shortage and infrastructure bottlenecks at congested ports continue to hound the growing economy. Due to the massive foreign direct investments, Australia's unemployment record is at a 33-year low, net immigration is at a record high and the prices paid for Australia's most important exports such as iron ore, coal and have risen. Moreover, household wealth has more than doubled in 15 years, the national car fleet is younger than befo re and contains more luxury brands, while homes are replete with high-end consumer electronics. The federal and state governments have registered budget surpluses and A$31bn (US$28bn, 14bn, 18bn) in tax cuts will soon be handed to the twenty one million population. The China-led boom in Australia is expected to last for many years as China is heavily dependent on imported raw materials for industrial production.British foreign direct investment in Australia spans several industries. The UK companies dominate EU direct investment in Australia at about 53 per cent. The UK is the second-largest source of direct investment in Australia behind the United States. The level of the UK's direct investment in Australia was about $51 billion. British firms held substantial investments in Australia, setting up operations in the resources and energy sector (for example, Shell and Rio Tinto-Zinc), telecommunications (Vodafone and British Telecommunications) and food and beverages (Cadbury and Uni lever). (DFAT, 2005). Moreover, Germany has 330 subsidiary companies and 470 branch offices in Australia. German investments are in banking and finance (Deutsche Bank), automotives (DaimlerChrysler, BMW, Bosch, Hella and VDO), telecommunications (Siemens) and chemicals (Boehringer, Schering). These investments have increased the economic growth of Australia. (DFAT Report, 2005) Free trade fosters the inflow of foreign direct investment hence, enhancing competition and innovation. (Heritage website). One of the supporting reasons for free trade is greater access to a greater variety of goods and services.The second argument is that trade generates economic growth. The Asean Free Trade Area registered a growth of 8% per annum due to the influx of foreign direct