552 Accounting: Business Reporting for Decision Making
13.9 International sources of funding
LEARNING OBJECTIVE 13.9 Describe the use of international finance.
Australia as a nation has traditionally relied heavily on overseas capital as a source of funds to assist in
our development. The need for international capital stems directly from our inability, for various reasons,
to save enough ourselves, and therefore to provide sufficient home-grown capital. Foreign investment
in Australian industry occurs when overseas investors make direct equity investments and lend directly,
or make portfolio investments in equities or debt. Direct investment is defined by the Reserve Bank of
Australia (RBA) as capital invested in an entity by an investor that has significant influence over the key
policies of the entity. An example of a direct equity investment is the establishment of Virgin Blue in
Australia. In contrast, portfolio investment is assumed to mean that the investor has no control over the
key policies of the entity. Australian companies can attract international funding by offering securities
for sale in overseas markets and attracting foreign investors to purchase securities in Australian markets.
For example, both Woolworths Ltd and Telstra Corporation have raised debt in foreign capital markets
and denominated in foreign currencies.
VALUE TO BUSINESS• Australia as a nation has traditionally relied heavily on overseas capital as a source of funds to assist
in our development.
• Foreign investment in Australian industry occurs when overseas investors make direct equity
investments and lend directly, or make portfolio investments in equities or debt.
• Direct investment is defined by the RBA as capital invested in an entity by an investor that has
significant influence over the key policies of the entity.
• Portfolio investment means that the investor has no control over the key policies of the entity.