Australia slips out of global top 10 as an attractive investment destination
Global management consulting firm Kearney has released its latest foreign direct investment confidence index, with Australia slipping out of the top ten at the expense of regional competitors.
Having last year held on to its top-ten spot on Kearney’s annual index, Australia has now fallen to 12th, jumped on the ladder by Singapore, South Korea, and Saudi Arabia, with 88 percent of respondents saying they plan to increase foreign investment over the next three years.
While the survey of 500 senior execs at $500 million-plus revenue-generating companies was conducted earlier in the year, such that the 2026 rankings don’t reflect the current Middle East conflict, Kearney nonetheless suggests Australia’s lower placing should be a wake-up call.
“Australia’s drop is a reminder that competition for global capital is intensifying,” said A/NZ managing partner Sarovar Agarwal. “While the local market’s openness and long-term appeal remain intact, investors are recalibrating their decisions against a backdrop of geopolitical uncertainty, shifting industrial policy, and technological change, and no market can afford to stand still.”
As per usual, and despite its current erratic economic governance, the US remains atop of the table, with Canada again in behind. Japan has however moved into third at the expense of the UK, which has slipped to sixth behind China and Germany. The other big mover in the top ten was Singapore, which rocketed from 15th into 8th, while Saudi Arabia and Korea each moved up three places.
The Australian case
As to the survey’s sub-categories, Australia outshone every country bar South Korea for infrastructure, was a top performer for transparent governance, and compared favourably for ‘ease of doing business’. Naturally, the nation’s natural resources were also a strong draw-card, but unfortunately Australia ranked third-last among the top 20 nations for tech innovation.
“Australia sits among the most open OECD economies to foreign direct investment, underpinned by its economic liberalism, political stability, transparent legal system, strong growth trajectory, and participation in major trade agreements,” the Kearney report states, with economic performance cited by 29 percent of survey respondents as the primary reason to invest in Australia.
While flawed as a true gauge of activity or perceptions, in that the foreign business leaders were asked to select their two most attractive reasons for investment (such that 18th-placed Brazil outranked Australia for tech innovation due to having less appeal in other areas), the lowly status of the country’s tech scene among competitors is of some concern when looking at the bigger picture.
Japan’s jump into third overall was for example largely on the back of its technological innovation ecosystem, cited by 43 percent of investors to rank alongside the US. Indeed, the category was the first or equal-first reason given for investment into nine of eleven of the countries above Australia on the list, having last year comparatively accounted for only four of the top one dozen.
Kearney writes: “Tech capabilities overtake efficiency of legal and regulatory processes and domestic economic performance, reflecting surging global investment in AI and digital infrastructure. While economic fundamentals remain crucial, investor enthusiasm is increasingly centred on markets which demonstrate leadership in innovation and advanced technologies.”
An uphill climb
The scramble for resources, in particular lithium and other critical minerals and Australia’s abundance aside (with mining remaining the most enticing investment sector of any), the country in general continues to place well for overall economic confidence, especially as to stability, its three-year outlook drawing the second lowest rate of pessimism globally behind only Japan.
“This year’s report highlights some Australian strengths as an investment destination, with investors prioritising economic performance, natural resources, and infrastructure quality. They remain optimistic about investment here but there is some work to do to climb back up to where we were pre-Covid,” concluded Argawal, who took over as Kearney leader at the start of the year.
