Australia’s continued clampdown on foreign investment is a prime example of a growing risk to global economic growth and stability, according to the World Economic Forum’s latest report.
The Global Risks Report 2019, released on Wednesday, highlights a number of potential threats, including threats to the environment and threats posed by technology.
Just like in 2018, weapons of mass destruction remain the risk seen as having the largest potential impact.
Environmental risks such as extreme weather, a failure to mitigate and adapt to climate change, and major natural disasters are the three most likely risks to eventuate.
The report also warns that Western countries like Australia that have been ‘sharpening their power’ to strategically block overseas investments are potentially ‘sowing the seeds of tensions’ that will hamper wider global economic growth.
‘Australia has repeatedly tightened its inward investment rules in recent years, and in 2018 announced further restrictions on investment in electricity infrastructure and agricultural land,’ the WEF report said.
Foreign and particularly Chinese investment in Australia’s energy, infrastructure, technology and agriculture sectors has become an increasingly tense political issue over the last two decades.
Last February the federal government introduced new rules requiring foreign investors to demonstrate that farmland they wanted to buy had been marketed widely to potential Australian buyers first.
The government also called on overseas investors to liaise with the Foreign Investment Review Board if they were interested in buying or selling infrastructure such as electricity transmission, distribution and generation networks.
The WEF report warns that increasingly restrictive investment policies such as Australia’s could easily influence other countries to follow suit and clamp down, triggering a ‘vicious circle in which economic and geopolitical tensions aggravate each other’.
‘The data already point to a sharp fall-off in FDI (foreign direct investment) in 2017, despite other macroeconomic indicators being solid,’ the report said.
‘This trend continued in the first half of 2018. If this were to be sustained, it would leave many states- particularly smaller or weaker ones-having to make painful choices between securing investment for growth and maintaining fiscal control and strategic independence.’