Investing in Australia
Australia is one of the world's safest and most stable countries. The country draws considerable interest, ranking as a top destination for foreign direct investment and human capital migration. Australia is a reliable destination for low-risk investment with one of the world’s strongest currencies, high political stability, and a secure business environment. Are you curious to know more about opportunities to invest in Australia? Learn about Australian exchange-traded funds (ETFs), real estate crowdfunding, and P2P lending - 3 popular ways to invest in the Australian economy.
The Australian Economy
Australia is one of only nine countries with a top-rated AAA credit rating from the three major credit rating agencies: Moodys, S&P, and Fitch. The country currently sits as the 12th largest economy in the world by nominal GDP standards, recently overtaking Brazil for the spot on a strong rebound from the Covid-19 pandemic that commodity price hikes have fueled. Beyond just a large economy, Australia is one of the wealthiest nations on the planet, claiming the top overall position for median wealth per adult (USD) with $273,900.
Australia is a service-based economy with a highly skilled labor force that excels in areas like education-related travel, IT, professional services, and financial services. The country is exceptionally rich in natural resources, and its economy relies on exporting those products, particularly to China. Australia is the world’s largest exporter of iron ore, coal briquettes, and aluminum oxide, which helps enable a sizable trade surplus. Australia is expected to continue capitalizing on its natural resource wealth through this decade due to its geographic proximity and close economic ties with many rapidly growing Asian economies.
Besides natural resources, real estate is the other primary driver of household wealth and economic growth in Australia. Real estate prices have experienced tremendous growth over the last two consecutive decades. Outside of real estate, almost half of all Australians own shares of public companies, which they access primarily through the Australian Securities Exchange (ASX). The ASX is the 12th largest stock exchange in the world and provides investors access to various asset classes including equities, commodities, and energy.
Investing in Australia Through ETFs
ETFs are a great way to gain exposure to the Australian economy while offering investors solid returns and high liquidity. Australia has open capital markets that welcome foreign investors. Shares of Australian ETFs can be obtained through licensed brokerages with access to the ASX. For investors without brokerage access to the ASX or who prefer to invest in USD, there are also numerous ETFs tracking ASX-based indices listed on US exchanges.
The BetaShares Australia 200 ETF (A200) is a popular option for investors looking for diversified exposure to the top 200 listed companies on the ASX. It’s also the lowest-cost Australian shares ETF available with a management fee of just 0.07%. For investors seeking more specific access to Australia’s resources sector, the VanEck Australian Resources ETF (MVR) tracks the performance of the largest ASX-listed companies that generate at least half of their revenues or assets from Australian resources. Some other popular options for accessing Australia through ETFs are:
- Vanguard Australian Shares Index ETF (VAS)
- SPDR S&P/ASX 200 Resources Fund (OZR)
- VanEck S&P/ASX Midcap ETF (MVE)
- VanEck Australian Banks ETF (MVB)
Real Estate Crowdfunding in Australia
Australia is home to one of the world's most expensive real estate markets. Real Estate Crowdfunding in Australia allows you to easily buy a fraction of a property at low minimum investments. With most of its land uninhabitable and an immigration mandate to intake nearly 200,000 people each year to combat labor shortages, the value of real estate around Australia’s urban centers should continue to see healthy growth. However, even many relatively wealthy middle-income Australians find it challenging to afford property, as 70% of homes are beyond their financial reach.
Capable foreign investors won’t find investing in Australian real estate a simple process either. Those who want to invest in Australian property but who are not permanent residents or citizens of Australia have to get approval from the Australian government. There are also strict rules about what kind of properties can be purchased, additional foreign application fees, and restricted ability to obtain financing.
Fortunately, real estate crowdfunding platforms are gaining traction in Australia and offer both domestic and international investors the opportunity to participate in the country’s property market at a fraction of the cost. Minimum investment starts at $1,000, and you can invest in standard residential or commercial real estate, or even participate in special development projects like renewable energy. Check out any of the 4 real estate crowdfunding platforms operating in Australia for current opportunities.
Investing in Australia with Peer-to-Peer (P2P) Lending
For investors looking for Australian exposure beyond the typical asset markets tied to stocks and real estate, P2P lending could be a great option. The 10 P2P lending platforms operating in Australia provide investors with access to personal and business loan investing. P2P lending can provide a means of generating solid returns and the ability to receive monthly income payments.
The P2P lending market in Australia is regulated by the Australian Securities and Investments Commission (ASIC), which obligates providers of lending products to have an Australian financial services (AFS) license and an Australian credit license if promoting consumer loans.
The Bottom Line
Australia has many factors that make it a top-ranked investment destination, especially for those looking for stability and minimal risk. The country has one of the soundest banking systems of any country. It also has transparent markets with adequate regulation, making it a great place to park and grow money. With strong population growth expected through the rest of the century and a wealthy and highly educated workforce, the Australian economy should continue to excel and provide ample opportunity for economic prosperity. Investing in ETFs, real estate crowdfunding, or P2P lending are the easiest investment options in the Australian economy.
- United Nations Conference on Trade and Development (UNCTAD): “World Investment Report 2022”
- Financial Review: “Australia’s economy overtakes Brazil, nears Russia’s”
- Credit Suisse: “Global Wealth Report 2022”
- Australian Government Department of Foreign Affairs and Trade: “The importance of services trade to Australia”
- Finder: “Share Trading Statistics”
- Yahoo: “20 Largest Stock Exchanges in the World”
- CNBC: “Australia lifts permanent immigration by 35,000 to 195,000”
- Sydney Morning Herald: “Middle income first-home buyers unable to afford 70 per cent of homes”
- MOZO: “Can foreigners buy property in Australia?”
- Australian Securities & Investments Commission (ASIC): “Marketplace lending (peer-to-peer lending) products”
- World Economic Forum (WEF): “Global Competitiveness Report 2020”