FOREIGN INVESTMENT

Investment flows into and out of Australia are another important measure of openness. Outward investment can build up Australia's income-generating assets abroad, while inward investment can provide opportunities for businesses to access new technologies and management skills, as well as fund capital formation.

The proportion of foreign ownership in Australian enterprises is used as one indicator to measure this aspect of openness. Over the last couple of decades foreign ownership of Australian enterprises has ranged from a peak of 45% in 1991 to a low of 32% between 2006 and 2008. In 2009, this had risen to 36%. The volatility over this period is also an indicator of openness, as it reflects the ease with which equity can be invested or withdrawn. This openness may be reflective of the deregulation of the financial system in the mid 1980s.

Foreign residents and companies can invest funds into the Australian economy through direct investment, portfolio investment and other investment (see glossary). In 2008-09, portfolio investment accounted for 53% of total foreign liabilities, and direct investment made up another 25% (ABS 2009).