International comparisons of Australia's investment and trading position

International comparisons of Australia's investment and trading position

[Abstract]: Preliminary results suggest that Australia’s external
holdings of equity and debt as a percentage
of national income almost doubled
between 1997 and 2001. However, Australia’s
international investment position as a percentage
of national income is one of the lowest
amongst the major OECD countries. In 2001
approximately two-thirds of Australia’s total
investments were in the United States and the
United Kingdom. By contrast Australia’s trade
share (exports plus imports as a percentage of
Australia’s total world trade) with these countries
was approximately 20 per cent in the same
year. The major determinants of Australia’s
geographical allocation of portfolio investment
indicate a broad correspondence between
stock market capitalisation of destination
countries and the allocation of Australian financial
investments but with some deviations
from that baseline, where the deviations are
correlated with Australian trade patterns.Australia's disproportionate investment in few countries can be attributable to an extension of the home bias puzzle that has been observed by many researchers.

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