1350.0 - Australian Economic Indicators, Jul 2001  
ARCHIVED ISSUE Released at 11:30 AM (CANBERRA TIME) 29/06/2001   
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Special Article - Ownership characteristics of businesses undertaking capital expenditure in Australia, 1998-1999


This article was sourced from Australian Economic Indicators (Cat. no. 1350.0), July 2001


INTRODUCTION

There is ongoing demand by State Governments for more detailed information on foreign investment flows at a State level and for statistics on globalisation in general. To help satisfy this demand, the ABS has investigated the feasibility of producing a measure of private new capital expenditure according to whether the businesses undertaking that expenditure were Australian or foreign owned. Such a measure has the potential to inform debate and assist in policy formulation and evaluation in many areas. Experimental estimates, for Western Australia only, were published in September 2000 in the Information Paper Experimental Estimates of Foreign and Domestic Investment in Private New Capital Expenditure, Western Australia, 1998-1999 (ABS Cat. no. 5674.5). That work has now been extended to produce experimental estimates for the other States and Territories and, where possible, to publish these estimates at the State/Territory and Australian levels. Important outcomes of this study have been the construction of statistical links between various ABS datasets, and the development and validation of an appropriate methodology. This article provides estimates of Australian private new capital expenditure classified by Australian-owned and majority-foreign-owned businesses for the 1998-1999 financial year. Majority-foreign-owned businesses have been identified on the basis of foreign investment at 30 June 1999.


ANALYSIS

Of the $44.7 billion investment in private new capital expenditure reported in the ABS Survey of New Private Capital Expenditure in 1998-1999 (see Australian Economic Indicators (ABS Cat. no.1350.0), Table 3.5), businesses which were owned 50% or more by Australian residents invested $27.9 billion (62%) while businesses with majority foreign ownership invested $11.5 billion (26%). The study was unable to ascertain the ownership of businesses making 12% of the expenditure, but a substantial proportion of these are expected to be Australian owned.


Table 1 : Private New Capital Expenditure in Australia by Ownership Group, 1998-1999

Ownership Group
Australian
Foreign
Unknown
Total
State
$M
%
$M
%
$M
%
$M
New South Wales
8,283
57
3,984
27
2,253
16
14,429
Victoria
6,153
54
3,557
31
1,658
15
11,368
Queensland
5,121
69
1,477
20
800
11
7,398
South Australia
1,615
71
411
18
251
11
2,277
Western Australia
4,894
70
1,740
25
343
5
6,977
Tasmania
426
90
34
7
14
3
475
Northern Territory and
Australian Capital Territory
1,386
79
367
21
5
0
1,758
Australia
27,879
62
11,478
26
5,325
12
44,682


Table 1 shows estimates of private new capital expenditure by broad industry for 1998-1999, as already published in Private New Capital Expenditure, State Estimates, 1998-1999 (ABS Cat. no. 5646.0), classified according to the majority ownership (Australian/foreign/unknown) of the business making the capital expenditure. The industries covered are the same as those in the Survey of Private New Capital Expenditure.

The relative importance of investment in private new capital expenditure by majority-foreign-owned businesses was above 18% for all mainland States.


MINING

For Australia as a whole, majority-foreign-owned businesses contributed $2.2 billion or 25% of capital expenditure in mining (Table 2). This was mainly in oil and gas mining and coal mining. However, there were differences among the States. In 1998-1999, WA was the state with the greatest investment in capital expenditure by majority-foreign-owned businesses ($846 million, representing 23% of the total capital expenditure in mining for WA). In NSW, most of the mining expenditure by majority-foreign-owned businesses was associated with coal mining.


Table 2 : Mining - Private New Capital Expenditure In Australia by Ownership Group, 1998-1999
Ownership Group
Australian
Foreign
Unknown
Total
State
$M
%
$M
%
$M
%
$M
New South Wales
306
58
202
38
21
4
529
Queensland
1,457
86
240
14
0
0
1,698
South Australia
471
93
34
7
3
1
508
Western Australia
2,779
76
846
23
23
1
3,648
All other States
1,456
62
886
38
1
0
2,342
Australia
6,469
74
2,208
25
48
1
8,725


MANUFACTURING

At the Australia level, majority-foreign-owned businesses invested $3.9 billion (42%) of the capital expenditure in manufacturing (Table 3). This was mainly in machinery and motor vehicle manufacturing, metal products manufacturing, petroleum products manufacturing, non-metallic mineral products manufacturing and food manufacturing. For the States which could be published, all had majority-foreign-owned investment above 31%. WA had a high level of majority-foreign-owned investment with $699 million or 54% of the total capital expenditure for that State. In dollar terms, most of the capital expenditure by majority-foreign-owned businesses occurred in NSW ($1,236 million, or 43% of capital expenditure in NSW manufacturing) and Victoria (details suppressed for confidentiality reasons).


Table 3 : Manufacturing - Private New Capital Expenditure In Australia by Ownership Group, 1998-1999
Ownership Group
Australian
Foreign
Unknown
Total
State
$M
%
$M
%
$M
%
$M
New South Wales
1,163
41
1,236
43
461
16
2,860
Queensland
582
43
624
46
142
11
1,349
South Australia
405
52
238
31
134
17
776
Western Australia
530
41
699
54
55
4
1,284
All Other States
1,540
49
1,152
36
474
15
3,167
Australia
4,221
45
3,948
42
1,267
13
9,435


OTHER SELECTED INDUSTRIES

At the Australia level, majority-foreign-owned businesses contributed $5.3 billion or 20% of capital expenditure in the other selected industries included in the survey (Table 4). Within this category, majority-foreign-owned businesses made strong contributions in the following areas: communications (private sector only, excluding Telstra); electricity and gas distribution (private sector only - including the newly privatised Victorian utilities) ; machinery and motor vehicle wholesaling; motion picture production, TV and radio; and finance. Most of the capital expenditure by majority-foreign-owned businesses, in dollar terms of capital investment in the industries, occurred in NSW ($2,456 million, or 22%) and Victoria (details suppressed for confidentiality reasons).


Table 4 : Other Selected Industries - Private New Capital Expenditure In Australia by Ownership Group, 1998-1999
Ownership Group
Australian
Foreign
Unknown
Total
State
$M
%
$M
%
$M
%
$M
New South Wales
6,813
62
2,456
22
1,771
16
11,040
Queensland
3,082
71
612
14
658
15
4,352
South Australia
739
74
139
14
115
12
993
Western Australia
1,585
78
195
10
265
13
2,046
All Other States
4,971
61
1,920
24
1,202
15
8,092
Australia
17,189
65
5,323
20
4,010
15
26,522


REGIONAL GROUPS

Of the 26% of capital expenditure made by majority-foreign-owned businesses, 11 percentage points was incurred by businesses owned from the United States of America, 10 percentage points from the European Union and 5 percentage points from Other countries. The European Union investment was dominated by UK-owned companies, while among the Other countries category, Japanese-owned firms made the most significant contribution.


Table 5 : Private New Capital Expenditure In Australia by Regional Group, 1998-1999
Ownership Group
Australian
European Union
USA
Other
Unknown
Total
State
$M
%
$M
%
$M
%
$M
%
$M
%
$M
New South Wales
8,283
57
1,627
13
1,263
9
803
6
2,253
16
14,429
Victoria
6,153
54
864
8
2,165
19
527
5
1,658
15
11,368
Queensland
5,121
69
700
9
223
3
553
8
800
11
7,398
South Australia
1,615
71
128
6
216
10
67
3
251
11
2,277
Western Australia
4,894
70
499
7
1,009
15
232
3
343
5
6,977
Tasmania
426
90
12
3
17
4
5
1
14
3
475
Northern Territory and
Australian Capital Territory
1,386
79
257
15
58
3
50
3
5
0
1,758
Australia
27,879
62
4,289
10
4,952
11
2,237
5
5,325
12
44,682


US-owned businesses invested nearly $5 billion, mainly in Victoria ($2.2 billion, or 19% of all capital investment in that State), NSW ($1.3 billion, or 9%) and WA ($1.0 billion, or 15%). Low proportions of capital expenditure by US-owned businesses were seen in Queensland, Tasmania and NT/ACT. European Union-owned businesses invested $3.9 billion. They had a different pattern of investment from US-owned businesses, with most investment in NSW ($1.7 billion, or 12% of capital expenditure in the State) and Victoria ($803 million, or 7%). Other foreign countries invested $2.6 billion, mainly in NSW ($949 million, or 7%), Queensland ($674 million, or 9%) and Victoria ($588 million, or 5%). There was significant Japanese investment in Queensland, but less Japanese investment in other States. UK-owned businesses were significant investors in most States. State details of capital expenditure by UK- and Japanese-owned businesses have been suppressed for confidentiality reasons.


TYPE OF ASSET

Investment in buildings and structures by majority-foreign-owned businesses was 21% of total investment in buildings and structures. Expenditure was greatest in Victoria. For Australia as a whole, majority-foreign-owned businesses invested 28% of total investment on equipment, plant and machinery.

Majority-foreign-owned businesses invested proportionately more capital on equipment, plant and machinery than did Australian businesses. Of the $11.5 billion capital expenditure undertaken by majority-foreign-owned businesses in 1998-99, $8.6 billion (75%) was spent on equipment, plant and machinery and $2.9 billion (25%) was spent on buildings and structures. This compares with investment by Australian-owned businesses of $17.8 billion (64%) on equipment, plant and machinery and $10.1 billion (36%) on buildings and structures.


Table 6 : Private New Capital Expenditure in Australia by Type of Asset, 1998-1999
Ownership Group
Australian
Foreign
Unknown
Total
Type of Asset
$M
%
$M
%
$M
%
$M
Buildings & structures
10,085
74
2,918
21
706
5
13,709
Equipt, plant & machinery
17,794
58
8,561
28
4,618
15
30,973
All Assets
27,879
62
11,478
26
5,325
12
44,682


ANALYSIS OF BUSINESSES WITH UNKNOWN OWNERSHIP

The businesses with unknown ownership were mainly in the smaller size categories in industries with low foreign investment. The main industries were (in descending order of unexplained expenditure): business services; accommodation, hotels and restaurants; road transport; construction trades; personal and household goods wholesaling; printing and publishing; general construction; and property services.


COMPARISON OF RESULTS WITH A PREVIOUS STUDY

The ABS has previously carried out one study, in respect of 1982-1983, of foreign control of new fixed capital expenditure in Australia. In that previous study, a foreign investor was said to have control of a firm if it was the largest investor having an equity of 25% or more. However, for the purposes of this current study, with respect to 1998-1999, a business was said to be majority-foreign-owned if foreign direct investors owned more than 50% of the total equity. The degree of foreign control in Australia of capital expenditure found in the 1982-1983 study (29%) was slightly higher than the level of capital expenditure by majority-foreign -owned businesses in the present study (26%). Further information on the derivation of ownership, and the methodology employed in this study, is available on request from the ABS, and is available from the Statistical Concepts Library on the ABS website (Balance of Payments - Concepts, Sources and Methods (Cat. no. 5331.0)).


RELATED PUBLICATIONS

Users may also wish to refer to the following publications:
  • Private New Capital Expenditure - State Estimates (Cat. no. 5646.0)
  • Experimental Estimates of Foreign and Domestic Investment in Private New Capital Expenditure, Western Australia, 1998-99 (Cat. no. 5674.5)
  • Foreign Control of New Fixed Capital Expenditure by Private Enterprises in Selected Industries, Australia - 1982-83 (Cat. no. 5333.0)


FURTHER INFORMATION

Further information can be obtained by contacting Annette Barbetti on Canberra 02 6252 5410 or e-mail annette.barbetti@abs.gov.au