INTERNATIONAL INVESTMENT POSITION

Australia's net international investment position is the difference between the levels of Australia's foreign financial liabilities and the levels of its foreign financial assets. Historically, Australia has had a net liability position with the rest of the world.

Australia's net international investment position at 30 June 2002 was a net foreign financial liability of $390.5b. This was up $29.5b (8.2%) on the position a year earlier and resulted from net increases of $13.2b in the level of foreign equity and $16.3b in the level of foreign debt.
 

INTERNATIONAL INVESTMENT POSITION
	Position at beginning of period	Changes in position reflecting				Position at end of period
		Transactions	Price changes	Exchange rate changes	Other adjustments
	$m	$m	$m	$m	$m	$m
NET INTERNATIONAL INVESTMENT POSITION
Total
1999-2000	321,655	30,919	-16,224	-9,193	-653	326,505
2000-01	326,505	14,339	30,211	-6,238	-3,782	361,034
2001-02	361,034	20,286	10,064	-216	-641	390,527
Equity
1999-2000	90,967	-8,249	-13,852	-21,189	1,024	48,700
2000-01	48,700	3,048	26,674	-28,313	-2,547	47,562
2001-02	47,562	-15,061	13,833	13,973	456	60,764
Debt
1999-2000	230,689	39,168	-2,373	11,996	-1,677	277,804
2000-01	277,804	11,289	3,537	22,076	-1,234	313,472
2001-02	313,472	35,345	-3,768	-14,189	-1,097	329,763
FOREIGN ASSETS
Total
1999-2000	-325,163	-27,334	-47,638	-27,051	1,162	-426,024
2000-01	-426,024	-49,779	32,718	-39,109	-1,356	-483,551
2001-02	-483,551	-48,421	47,642	13,366	-1,285	-472,251
Equity
1999-2000	-196,013	-19,611	-46,115	-21,189	872	-282,057
2000-01	-282,057	-18,913	31,804	-28,313	-769	-298,247
2001-02	-298,247	-42,856	48,913	13,973	-143	-278,359
Debt
1999-2000	-129,150	-7,722	-1,523	-5,860	288	-143,967
2000-01	-143,967	-30,867	913	-10,794	-588	-185,304
2001-02	-185,304	-5,565	-1,272	-608	-1,143	-193,891
FOREIGN LIABILITIES
Total
1999-2000	646,818	58,254	31,414	17,857	-1,814	752,528
2000-01	752,528	64,118	-2,507	32,870	-2,426	844,584
2001-02	844,584	68,707	-37,578	-13,582	645	862,778
Equity
1999-2000	286,979	11,362	32,264	-	152	330,757
2000-01	330,757	21,962	-5,130	-	-1,779	345,809
2001-02	345,809	27,796	-35,081	-	599	339,123
Debt
1999-2000	359,839	46,890	-850	17,857	-1,965	421,771
2000-01	421,771	42,155	2,624	32,870	-647	498,775
2001-02	498,775	40,910	-2,497	-13,582	47	523,654
(a) Assets include claims of Australian direct investment enterprises on direct investors abroad, which are classified as part of direct investment in Australia. (b) Liabilities include liabilities of Australian direct investors to direct investment enterprises abroad, which are classified as part of direct investment abroad.
Source: Balance of Payments and International Investment Position, Australia (5302.0).

Foreign policy

Due to Australia's geographic location and the orientation of its trade and strategic interests, the Asia Pacific region has long been the focus of its foreign policy. But as a country with a prosperous and diverse economy,a technologically advanced society, and a long history of strong commitment to liberal democratic values,
Australia also looks beyond the region to play an active role in the development of solutions to global economic, social and strategic problems.

The two fundamental trends in the international environment that affect the development of Australia's foreign and trade policies have been identified as globalisation and the economic and political rise of East Asia. To meet those developments, Australia's policy framework combines elements of continuity and change, including:
 

• Reaffirmation of the Asia Pacific region as Australia's highest foreign and trade policy priority 
• Development of Australian interests in other regions, in line with Australia's global role 
• Recognition that the most fundamental means of promoting Australia's national interests lies in developing bilateral ties with other nations 
• Selectivity in the pursuit of multilateral diplomacy, with most effort given to the issues that most closely engage Australia's national interests 
• Active pursuit of Australia's trade interests at the bilateral, regional and multilateral levels, with particular emphasis on the promotion of trade and investment liberalisation in forums like the World TradeOrganisation and APEC. 

Australia also has significant interests in its relationships with the ASEAN states and the Republic of Korea, and growing links with South Asia. The significance of Australia's engagement with its region was dramatically evident in Australia's reaction to the East Asian economic crisis, and to developments in East Timor—on both occasions, Australia acted speedily and effectively to help achieve equitable outcomes.

Historically, Australia has developed close ties with New Zealand, Papua New Guinea, and the other island states of the South Pacific.

Australia places great emphasis on the need for foreign and trade policies to be informed and guided by the values of the community it represents. In Australia's case this means drawing on its strong traditions of liberal democracy which have been uniquely fashioned in its tolerant and multicultural society.

This is reflected in Australia's absolute rejection of racial discrimination and its strong commitment to, and effective pursuit of, human rights and sustainable development. Australia participates in United Nations (UN) and other international forums relating to the status and advancement of women, children and indigenous
peoples. More broadly, Australia is active in multilateral diplomacy and has been a consistent supporter of the UN's Charter and the work of the UN's various agencies.

Australia has long been active in international efforts to address regional and global environmental problems. Australia advocates the adoption of imaginative, effective, and flexible initiatives to meet these problems, recognising that global action must be equitable and practicable. For these reasons, for example, the Australian Government advocates differential national greenhouse gas emission targets, rejecting flat-rate target approaches that would ignore the reality of differing national economic circumstances and which would actually be more costly.

Australia has also played a major role in the development of international regimes to prevent the proliferation of missiles and of nuclear, chemical and biological weapons, as well as the prohibition of nuclear testing. Australia has supported the development of international measures to ban the use of, and trade in,
anti-personnel landmines, and measures to deal with the humanitarian disaster caused by landmines. Australia has ratified the Ottawa Treaty banning the use, stockpiling, production and transfer of anti-personnel mines, and Australia's defence forces have already destroyed their stocks of mines—four years ahead of
schedule.
 

Development assistance

The Australian Government's overseas aid program assists developing countries to reduce poverty and achieve sustainable development. It focuses on the Asia Pacific region, with Papua New Guinea, the Pacific and the poorest regions of East Asia being the areas of highest priority. Australia also contributes selectively to
development needs in South Asia, Africa and the Middle East.

The sectors of highest priority for the aid program are governance, health, education, agriculture and rural development, and infrastructure.

More than one billion people live in developing countries in Australia's region. Some of these countries have among the worst literacy and infant mortality rates in the world. Many of these countries are vulnerable to natural disasters. Key issues that have affected Australia in recent years include the Asian financial crisis, East Timor and the peace and reconstruction process in Bougainville. Australian interventions to tackle poverty are tailored to the specific situations that exist in the Asia Pacific region.

Australia's aid program has made significant achievements.

In Papua New Guinea, the aid program has played a major role in eradicating poliomyelitis and neonatal tetanus through immunisation programs.

Australia has been at the forefront of efforts to help address the economic and social impacts of the Asian financial crisis. These have included:

•  a $50 million economic and financial management package to help improve economic governance capacity 
•  a $5 million social protection facility for East Asia to address some of the impacts of the crisis on children and social safety nets 
•  The convening of a major international meeting on development cooperation responses to the crisis in Sydney in 1999. 

Australia endeavours to maintain its aid at the highest level, consistent with the needs of partner countries and its own economic circumstances and capacity to assist. The majority of Australia's aid program is delivered directly by Australia to partner countries and Australian companies are employed to manage and deliver most of Australia's development projects. However, fostering links between the Australian community and the people of developing countries and utilising the comparative advantages of multilateral organisations (for example, United Nations development agencies and multilateral development banks) are also integral to the aid program. Australia acknowledges the importance of engaging with a wide range of aid delivery organisations, including non-government organisations, in promoting development and responding to emergencies.

Export finance

The Export Finance and Insurance Corporation (EFIC), Australia's official export credit agency, complements the private sector by providing a specialized range of insurance, guarantee and finance facilities not normally available commercially.

In particular, EFIC serves small- to medium-sized enterprises whose low export turnover make them less attractive to the private sector. In 1998-99, it supported exports totaling $7.6 billion (or about seven per cent of Australia's exports).
 

APEC

The APEC forum was established in Canberra in 1989 as an informal group of 12 economies whose objective was to promote economic cooperation in the Asia Pacific region.

It has since developed into the region's premier economic organization, its membership now numbering 21economies covering North and South America, East Asia and Oceania. APEC members represent a region of over two billion people and account for around half the world's trade.

APEC's work is about generating exports, increasing economic growth and creating jobs. It seeks to achieve this by promoting more open markets for trade and investment and making it easier to do business in the region by,for example, simplifying administrative procedures relating to trade and making different national systems more compatible. 

APEC is also helping to build the institutional capacity of developing country members and is playing a role in dealing with some of the problems that led to the Asian economic crisis.

In addition to its economic focus, APEC provides an important mechanism for Asia-Pacific leaders to discuss current regional and international issues at their annual meeting.

Australia is an active member of APEC and is committed to achieving APEC's goal of free and open trade and investment by 2010 in industrialized APEC economies and 2020 in developing ones. Implementation of these goals will result in significant improvements in access to regional markets for Australian exporters and investors.

Currently, over two-thirds of Australia's goods and services exports go to other APEC economies while around 70 per cent of Australia's imports come from APEC countries.
 

Sales Tax
 

The fundamental concept of the original sales tax legislation has been retained, i.e., sales tax is a tax on goods either produced in Australia or imported into Australia for consumption or use in Australia.  The intention is that all such goods (except those covered by an exemption) should bear a once-only tax based on their last wholesale selling price.  The normal point at which the tax is levied is the last wholesale sale, however other points may be used in appropriate circumstances.

As can be seen from the above, goods manufactured within Australia and exported prior to consumption of use (and goods imported for export without being used within Australia) will not incur a sales tax liability.

When goods are imported into Australia, they are subject to sales tax at the time of `local entry' which is the term used in the new legislation for entry for home consumption i.e. when the goods are released by Customs. Tax is still calculated on the same value as under the previous legislation i.e.120% of the total of the value for July, plus any duty payable.

This liability for sales tax occurs whenever goods are imported unless the goods;

i) are unconditionally exempt in their own right, e.g. clothing, books,

ii) are entered under quotation of a registration number,

iii) are entered under quotation of an exemption declaration.

Only registered persons may quote a registration number and registered persons may not quote an exemption declaration. Similarly unregistered persons may not quote a registration number.  Registration is now voluntary, but that certain exemption items are restricted to registered persons.  This means that access to exemption under these items (mainly items covering the old 'business inputs' exemption) is not available to unregistered persons.

Due to problems in registration all manufacturers of exempt goods who were previously not required to be registered, arrangements have been made that exemption declarations can be made for these business input items.  This arrangement continued until 31 March 1993.  After this date, importers are obliged to be registered in order to obtain these goods free of sales tax. There are a large number of other Commonwealth and State taxes, including fringe benefits tax, sales tax, payroll tax, land tax, stamp duty and bank account debits tax.

Double Taxation Agreements

In addition to unilateral relief from double taxation provided by a foreign tax credit system, Australia has comprehensive agreements in force to avoid double taxation with Austria, Belgium, Canada, China, Czech Republic, Denmark, Fiji, Finland,France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Kirabati, Republic of Korea, Malaysia, Malta, Netherlands, New Zealand,Norway, Papua New Guinea, Philippines, Poland, Singapore, Spain, Sweden, Switzerland, Sri Lanka, Thailand, UK, US and Vietnam.