ANALYSIS AND COMMENTS

INTERNATIONAL INVESTMENT POSITION

Australia’s net international investment position at 31 December 2010 was $782.1 billion, an increase of $7.2 billion on the previous year.

Level of foreign investment in Australia

The level of foreign investment in Australia increased by $61.3 billion to reach $1,967.8 billion at 31 December 2010. Portfolio investment accounted for $1,146.4 billion (58%), direct investment for $473.7 billion (24%), other investment liabilities for $243.5 billion (12%) and financial derivatives for $104.2 billion (5%). Of the portfolio investment liabilities, debt securities accounted for $766.1 billion (39%) and equity securities for $380.3 billion (19%).

The leading investor countries at 31 December 2010 were:

• United States of America ($549.9 billion or 28%)
• United Kingdom ($472.6 billion or 24%)
• Japan ($117.6 billion or 6%)
• Singapore ($43.8 billion or 2%)
• Netherlands ($42.4 billion or 2%)
• Hong Kong (SAR of China) ($40.8 billion or 2%).

In addition, the level of borrowing raised on international capital markets (e.g. Eurobonds) was $62.8 billion or 3%.

The following graph illustrates the percentage share, by leading countries, of the total level of foreign investment in Australia at 31 December 2010.

Level of Australian investment abroad

The level of Australian investment abroad reached $1,185.7 billion at 31 December 2010, an increase of $54.0 billion on the previous year. Portfolio investment abroad accounted for $460.5 billion (39%), direct investment for $361.8 billion (31%), other investment for $220.8 billion (19%), financial derivatives for $100.9 billion (9%) and reserve assets for $41.6 billion (4%). Equity has been the main form of Australian investment abroad during the past decade. At $615.4 billion, equity represented 52% of the total level of investment at 31 December 2010.

The leading destination countries as at 31 December 2010 were:

• United States of America ($410.0 billion or 35%)
• United Kingdom ($192.3 billion or 16%)
• New Zealand ($73.9 billion or 6%)
• Canada ($39.2 billion or 3%)
• Germany ($37.2 billion or 3%)
• France ($29.4 billion or 2%).

The following graph illustrates the percentage share, by leading countries, of the total level of Australian investment abroad at 31 December 2010.



FINANCIAL ACCOUNT TRANSACTIONS

The balance on financial account for the year ended 31 December 2010 recorded a net inflow (surplus) of $35.3 billion. This result is down $20.2 billion on the net inflow of $55.5 billion recorded for the previous year.

Foreign investment in Australia - Transactions

Foreign investment in Australia recorded a net inflow of $94.0 billion for the year ended 31 December 2010, a decrease of $68.5 billion on the net inflow of $162.5 billion for the previous year.

The leading investor countries during 2010 were:

• United States of America ($62.0 billion or 66%)
• United Kingdom ($47.7 billion or 51%)
• Japan ($13.9 billion or 15%)
• Hong Kong (SAR of China) ($5.0 billion or 5%)
• France ($4.6 billion or 5%)
• Germany ($3.0 billion or 3%).

The following graph illustrates the percentage share, by leading countries, of total financial transactions for foreign investment in Australian during the year ended 31 December 2010.


Australian investment abroad - Transactions

Australian investment abroad recorded a net outflow of $58.7 billion for the year ended 31 December 2010, a decrease of $48.3 billion on the net outflow of $107.0 billion for the previous year.

The leading destination countries during 2010 were:

• United States of America ($24.2 billion or 41%)
• United Kingdom ($22.3 billion or 38%)
• Japan ($4.3 billion or 7%)
• Canada ($4.0 billion or 7%)
• Luxembourg ($3.1 billion or 5%)
• Singapore ($2.5 billion or 4%).

The following graph illustrates the percentage share, by leading countries, of total financial transactions for Australian investment abroad during the year ended 31 December 2010.



INCOME

Income debits totalled $87.9 billion for the year ended 31 December 2010. This is up $7.9 billion on the income debits in the previous year. The main countries to which income accrued for the year ended 31 December 2010 were:

• United States of America ($21.8 billion or 25%)
• United Kingdom ($13.2 billion or 15%)
• Japan ($8.8 billion or 10%)
• Netherlands ($3.0 billion or 3%)
• Switzerland ($2.4 billion or 3%)
• Germany ($1.9 billion or 2%).

Income credits totalled $39.7 billion for the year ended 31 December 2010. This is up $6.1 billion on the income credits in the previous year. The main countries from which income accrued for the year ended 31 December 2010 were:

• United States of America ($11.9 billion or 30%)
• United Kingdom ($3.0 billion or 7%)
• New Zealand ($2.9 billion or 7%)
• Canada ($2.2 billion or 6%)
• Singapore ($1.8 billion or 4%)
• Germany ($1.3 billion or 3%).