Foreign Investment

Question 1

FIA meaning

Answer 1

Foreign investment into Australia

Question 2

AIA meaning

Answer 2

Australian Investment Aboard

Question 3

Liabilities

Answer 3

Created when AUS borrows money from overseas or sells assets to foreign residents
liable to pay money to another individual/nation

Question 4

Assets

Answer 4

Created when Australia leans money to overseas or buys assists from overseas residents
other individuals/nations are liable to pay money

Question 5

Equity

Answer 5

Ownership

Question 6

Debt

Answer 6

liable for borrowing

Question 7

Current Account Balance

Answer 7

income is recorded in current account. its direction into or our of Australia changes the CAB

Question 8

foreign equity

Answer 8

a representation of how much foreign residents own Australian assets

Question 9

foreign liabilities

Answer 9

how much public and private residents owe overseas residents

Question 10

Gross debt

Answer 10

total of all borrowing

Question 11

Net debt

Answer 11

gross debt minus Australian lending

*best measure

Question 12

proportion of government debt

Answer 12

31%

Question 13

proportion of private debt

Answer 13

69%

Question 14

trends in foreign debt

Answer 14

foreign debt has increased while foreign equity has decreased

Question 15

benefits of debt

Answer 15

increased standard of living
accumulation of wealth
*wealth per capita
develop the economy

Question 16

stock variable VS flow variable

Answer 16

stock: accumulation over time
flow: shows change over 1 year

Question 17

criticisms of debt

Answer 17

potential down grade of credit rating
high interest repayments reduces SoL
if ToT deteriorates this reduces X income
if AUD depreciates, the size of foreign debt increases
if trade partners economies slow, reduction in X income

Question 18

foreign investment

Answer 18

when a foreign entity establishes a new business or purchase property or shares in Australia

Question 19

proportion of FDI ,portfolio and other investment in AUS

Answer 19

FDI: 27%
Portfolio: 48%
other: 25%

Question 20

FDI

Answer 20

when a foreign entity owns 10%+ of Australia enterprise
therefore significant influence (linked to ownership ad control)
done through the purchasing of shares (equity investment)

Question 21

volatility of FDI and portfolio investment

Answer 21

FDI is less volatile then portfolio investment

portfolio investment is short term speculative

Question 22

influences of foreign investment

Answer 22

expectations (profit)
interest rate differentials
political stability

Question 23

Foreign investment by industry

Answer 23

mining
manufacturing
finace and insurance

Question 24

Foreign investment my country

Answer 24

U.S.A
U.K
Japan

Question 25

Cost of debt

Answer 25

if used to fund preexisting debt = bad debt

can contribute to a two speed economy

Question 26

Benefits from FDI

Answer 26

helps fund the SI gap
enables higher incomes, employment, standards of living, economic growth
develops sectors (mining and energy sectors)
encourages competition and innovation
enhances productivity thorough capital deepening