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1301.0 - Year Book Australia, 2001  
Previous ISSUE Released at 11:30 AM (CANBERRA TIME) 25/01/2001   
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AN ACCOUNT OF INVESTMENT IN AND BY THE SIX COLONIES

Australia's International Investment Position summarises Australia's financial assets and liabilities with the rest of the world. The position at any given time is the accumulation of the surpluses or deficits that Australia has produced with the rest of the world over time, mainly as a result of its trade and the receipt and payment of income on investments. In the year 2000 we have a very complete framework for the quarterly compilation of Australia's International Investment Position. Interest by users extends to direction of investment, type and instrument of investment and into sector and industry of investment. However, this complete and detailed framework has been developed quite recently. In 1901 statisticians focused very much on 'real' activity, such as buying and selling, imports and exports, and any investment statistics were calculated and published in bits and pieces, depending on the interests of the compiler or author, giving us a very fragmented picture.

At the beginning of the century, the only source of funds invested in Australia was the United Kingdom. Coghlan
1 states that total foreign investment in Australia (both equity and debt) at the end of 1901 was 320m, or 83 11s 4d per inhabitant. In current prices that is equivalent to $31b, or $8,000 per inhabitant. By June 2000, foreign investment in Australia had increased over twenty fold to $677b, or $35,568 per inhabitant. Writing in 1902, Coghlan's main concern is easily recognisable today. He was worried about "the tribute paid yearly by Australasia to London", or the ability of Australia (and New Zealand) to service their debts. Coghlan records the annual servicing of this debt at 13m, a rate of 4% per annum.

In 1901 the public sector received 60% of the foreign investment, while the private sector received 40%. While we do not know much about the composition of this foreign investment beyond the public/private split, Butlin
2 has published data on flows which tell us that, of new debt being incurred in 1900, 64% was public borrowing. Of the remainder, the most significant flow was investment in the mining industry.

Throughout the century, Australia continued to rely on overseas funds to finance investment. During the first half of the century, the sources of these funds were limited, with most continuing to come from the United Kingdom.


It was not until the late 1940s that the first reasonably comprehensive surveys of investment in Australia and by Australia overseas were conducted by the Commonwealth Statistician.
3 While the scope and definitions differ considerably and we are unable to compare the data directly with today's data, they give us a reasonable picture of the situation about half way through the century, and we can make some indicative comparisons using proportions. Table 30.16 shows the proportion of equity investment in Australia by country in 1949 and 1999, using the set of countries published for 1949.

30.16 FOREIGN INVESTMENT IN AUSTRALIA, Equity - 1949 and 1999

1949

%
1999

%

Country of investor
- United Kingdom
73.3
35.1
- New Zealand
5.4
3.5
- Canada
2.0
0.7
- United States of America
15.1
32.4
- Other countries
4.2
28.3
Total
100.0
100.0

Source: The Australian Balance of Payments 1928–29 to 1948–49 (Commonwealth Bureau of Census and Statistics); International Investment Position, Australia, 1998-99: Supplementary Country Statistics (5352.0).



In 1999 the main contributors to 'Other countries', were Japan, with 5.4% of total foreign investment, the Netherlands 3.2%, Germany 2.2% and Switzerland 2.1%.


Table 30.17shows the proportion of equity investment by Australia abroad by investee country in 1949 and 1999, using the 1949 set of countries.


30.17 AUSTRALIAN INVESTMENT ABROAD, Equity - 1949 and 1999

1949

%
1999

%

Country of investee
- United Kingdom
29.9
24.4
- New Zealand
41.3
5.5
- Canada
2.5
1.5
- United States of America
1.0
41.0
- Other countries
25.3
27.6
Total
100.0
100.0

Source: The Australian Balance of Payments 1928-29 to 1948-49 (Commonwealth Bureau of Census and Statistics); International Investment Position, Australia, 1998-99: Supplementary Country Statistics (5352.0).



Of Australian investment in 'Other countries' in 1999, the main investee countries are Japan, with 4.6% of total Australian investment abroad, Hong Kong (SAR of China) 2.8%, and Netherlands 2.6%.


As well as the main source of equity funding, the United Kingdom remained the main source of debt funding throughout the first half of the century. As an example, of the overseas public debt liabilities in 1949, 90% was domiciled in London, with the remainder domiciled in New York. In 1999 the main sources of debt financing (both public and private) were from the United States of America, with 22.8% of total debt, the United Kingdom 18.1%, International Capital Markets 15.7%, Japan 8.6%, Singapore 4.4% and Hong Kong (SAR of China) 4.3%.


The second half of the century was typified by a diversification of the sources of both equity and debt funding and by increasing levels and diversity of Australian investment abroad.


During the 1920s and again during the 1980s, a political issue was debt incurred to pay for levels of imports which could not be sustained using only receipts from exports, with many claiming that we were "living beyond our means". This debate is alive again in the year 2000, and one wonders, if Coghlan were still with us, to what extent he would worry about "the tribute paid yearly by Australia to New York and Tokyo".



Endnotes

1
. Coghlan T.A. 1902, A Statistical Account of the Seven Colonies of Australia, 1901-1902, The Government of New South Wales and the Commonwealth of Australia, William Applegate Gullick, Government Printer, Sydney.

2
. Cited in Vamplew, W. (ed.) 1987, Australians: Historical Statistics, Fairfax, Syme and Weldon Associates, Broadway, New South Wales.

3
. Commonwealth Bureau of Census and Statistics 1950, The Australian Balance of Payments 1928--29 to 1948--49, Canberra.

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