Australia retains 10th spot on Kearney investment index, but IR changes could cause a slide

Australia’s tax and regulation burden could threaten its attractiveness to international investors, management consulting giant Kearney believes.

Kearney’s ANZ managing partner Adam Dixon. Picture: Luke's Lens

A global consulting firm says Australia is at a crossroads and must look at the burden of its tax and regulatory systems if it is to retain its leading position for investors.

A new report from Kearney, a global management consulting giant, has found Australia has retained its 10th spot in its foreign direct investment confidence index.

This puts Australia ahead of Italy and Singapore at 11th and 12th place respectively, but trailing Spain, the United Arab Emirates and Japan.

Kearney ANZ managing partner Adam Dixon said Australia retained its place due to the country’s continued attractiveness to global investors.

But Mr Dixon said Australia’s position could slide as rivals with less onerous regulatory systems or smaller tax takes attracted new investments.

He said the federal government’s recent foray into industrial relations reform could be seen by some businesses as making make Australia less enticing to invest in.

“I anticipate the future outcomes of the IR changes will make it more challenging and more costly to do business in Australia over the long term,” Mr Dixon said.

The Kearney executive oversees almost 200 staff in Australia who work with some of the ­country’s biggest corporate ­clients.

He said taxation, regulation and industrial relations laws were key areas to “watch out for”, noting that amendments could “strengthen the relative competitiveness of Australia as a general economy” in comparison to its rivals.

“I would frankly like to see a more creative and decisive voice within politics to be able to address some of these long-term competitive issues,” Mr Dixon said.

Australia’s high cost of living was also an issue for the country to overcome in presenting its business case to the rest of the world.

Mr Dixon said investors took this into account, but noted companies were also prepared to pay more for some projects in Australia due to the country’s high skills base.

“Another side when you’ve got the abundant natural resources Australia has, labour is a relatively small component of the overall investment,” he said.

“The forward looking investment around education and making sure Australia has a highly skilled workforce with a sophisticated immigration system to attract the world’s talent, is a critical thing to do.”

Mr Dixon said Australia was seen as a safe haven “in a turbulent world”, and this factor made the country attractive to investors looking to start companies or buy existing assets.

The FDI Index finds business leaders are increasingly optimistic about the global economy, with Australia ranked among the top five most optimistic for its economic outlook in the survey of business leaders who are from the country or deal with the country.

Mr Dixon said this lift in optimism “does bode well for investment”.

He said Australia presented investors with a stable political environment, and a healthy and growing economy.

Australia’s near neighbour New Zealand slid in the rankings, dropping one place to 16th.

Originally published as Australia retains 10th spot on Kearney investment index, but IR changes could cause a slide