Table of Contents 1.0 Objectives...............................................................................................................3 2.0 Project Background................................................................................................4 3.0 Academic Literature Review...................................................................................5 3.1 Research problem for study................................................................................5 3.2 Specific Research Objectives.............................................................................5 3.3 Scope of the Research........................................................................................6 4.0 Research Design and Strategy..............................................................................6 4.1 Data Collection....................................................................................................6 4.2 Data Analysis......................................................................................................6 5.0 Expected Outcomes of Project...............................................................................7 6.0 Timeline................................................................................................................10 7.0 Resources.............................................................................................................10 References.................................................................................................................11 Page2of12
1.0 Objectives The financial market of Australia has traditionally been open to the world. As a result, the financial structure has been favourable for external investors to invest in the market. Simultaneously, the Australian government including corporate sectors have borrowed fund from foreign countries due to the liberalized economy. Integration with the global capital market may be considered to be a double-edged sword. The Australian corporate houses may get the advantage of borrowing from different countries at a different rate and thereby leverage their capital structure due to enough access to the financing provision (Ozkan, Cakan and Kayacan, 2017). On the other hand, the foreign investment made by Australia in different countries around the globe may have enabled the investors to diversify their portfolio at an international level. However, such integrated economy may suffer from a certain limitation in the form of fluctuation in global market scenario and the corresponding impact on the domestic economy as well (Geddes, Schmidt and Steffen, 2018). The investment banks in Australia are known for their huge market capitalisation and stable growth prospects for years within the national territory of the country. The impact of foreign direct investment through the banking channel has always been an interesting aspect to study in the field of business and commerce. As a result, the same holds true for the purpose of this research paper as well. The primary objective of the research, therefore, may be considered to be examining the problems that the Australian government may face due to the operation of foreign investment banks in the economy. The entire paper will be developed and related topics will be discussed to meet the research objective as framed herein: Page3of12
2.0 Project Background Since the 1970s and 1980s, Australia had opened the door foreign direct investment inacrosssectorsincludingthebanking(Geddes,SchmidtandSteffen,2018). Australians are generally free to borrow and invest in different financial assets abroad and similar manner foreigners can also do the same in the Australian capital market due to such open-door policy. The figure below shows the financial openness from a policy perspective across the world where it shows that Australia is one of the most foreign investment-friendly countries and economies across the globe (Ozkan, Cakan and Kayacan, 2017). Figure 1: Financial Openness of the Global Economy including Australia (Source: How do global financial conditions affect Australia, 2020) In such backdrop, it becomes critical and significantly important to analyse on the fact whether such openness, nice especially in the banking sector, may create a sizable impact on Australian economy or not and such proposition forms the very essence of the background of the intended research project. Page4of12
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
3.0 Academic Literature Review 3.1 Research problem for the study In order to conduct the aforesaid study, the researcher has framed the research plan which involves the approach towards developing the literature review, identifying the research method and executing the research afterwards. Since the topic is relevant in terms of the ever-changing economic backdrop of the world, the significance of the topic lies on the same. It may be stated that the discussion on Australian current economic position is an important and relevant topic for the researcher especially, in the backdrop of coronavirus outbreak pandemic situation which has shaken up not only Australia but also the global economy as well. In such a scenario, it will be critical for the researcher to device the research problem accordingly. 3.2 Specific Research Objectives As stated earlier, the Australian economy is regulated to the extent of foreign investmentaswellasforeignborrowingsandthereforetheeconomymaybe considered to be volatile to the changes in external financial market across the globe (Wójcik, Knight, O’Neill and Pažitka, 2018). Also, to put it in simpler terms, it may be stated that any rate change in the global banking sector may affect the domestic economy. In a similar manner, Australian investment banks have been primarily dominated by foreign banks in the given market for few years and therefore any regulatory change in their respective country or any changes in the global economy mayaffectAustralianbankingsectoraswell.Thisvolatilescenarioformsthe essence of the research problem for the study. The researcher, in this work, will, therefore, attempt to identify the answer to do the following to research objectives: Page5of12
To identify the impact of foreign investment banks on Australian investment banking To identify the current situation of the Australian capital market To identify the potential impact of the coronavirus outbreak in the Australian capital market In order to achieve a reasonable explanation and answers to the aforesaid research objectives, it will be critical for the researcher to resort various analytical process. 3.3 Scope of the Research For the purpose of research design and strategy, the researcher has undertaken secondary research through the reference to various online media, books, journals, publicationsandseveralotherlearningmaterialsarereferred.Also,various government websites are also researched in order to get the relevant data. For the purpose of the given research, the Australian government website and the website of Reserve Bank of Australia (RBA) have been also referred and relevant data and informationhasbeenextractedtherefrom(Wójcik,Knight,O’NeillandPažitka, 2018). 4.0 Research Design and Strategy 4.1 Data Collection A stated earlier, the data will be collected from secondary research using online resources and the type of research will be qualitative. In order to assess the overall health of Australian economy data from the website of the Reserve Bank of Australia has been referred pertaining to the given period under review. Page6of12
4.2 Data Analysis Sincetheproposedresearchissecondaryresearchandbasedonqualitative approach, data from various websites, journals, publications have been referred. No specific sample size has been chosen in the given case and however, for the purpose of research last 5 to 7 years’ time span has been considered. 5.0 Expected Outcomes of the Project In recent years, the net inflow of capital within the Australian economy has declined. In initial days, the country used to borrow significant amount from external countries; however, in recent years, opposite trend has been witnessed and the shift from external borrowing to invest in foreign countries have been observed. Though, the net liability position has been increasing on a consistent basis showing a long-term upward trend, the recent fluctuation, to be more precise, the downturn has indicated the fact that the economy’s need for an external fund has considerably reduced. the figure shows the same (Lien and Sunner, 2019). Figure 2: Australia’s Net Foreign Liability (as % of GDP) (Source: How do global financial conditions affect Australia, 2020) Page7of12
Secure Best Marks with AI Grader
Need help grading? Try our AI Grader for instant feedback on your assignments.
Accordingly, the investment has declined and saving has increased. In such a backdrop integration with the global capital market has paved the way to foreign banks to penetrate into the Australian territory. Since the foreign banks provide credit to the institutions through a competitive and attractive loan scheme, the economy experiences a boom in terms of production and manufacturing. However, fluctuation and recession in global economy considerately affect the working of foreign banks operating in Australia as well (Lien and Sunner, 2019). The global downturn, especially in the year 2008, had compelled different countries to restructure their banking system and Australia, being an integrated financial market, had also been affected considerably. Foreign banks initially promoted the development through a sustainable credit system, however, the initial proposition of the Australian government to allow the foreign banks to bring with different and varieties of financial products gradually lost its significance (Wong, Higgins and Wakefield, 2017). As a result, the entrance criteria were changed by the government focusing more on strong risk management framework as installed by the banks. in thiscontext,itmaybenotedthattheforeignbankssupportedeconomic development through an aggressive and mass retail lending which enhanced the capital circulation and formation within the economy (Rogers, Wong and Nelson, 2017). Also, it may be interesting to note that the initial regulation of the financial sector has lately been relaxed and deregulation in the financial sector has been introduced by thegovernmentthroughaliberalisedforeigninvestmentframework.Presently Australia is considered to be an attractive destination for foreign investment which may be correlated from the fact that the country has a stable political environment, sound macroeconomic management, efficient workforce and also a stable regulatory Page8of12
framework (Regan, 2017). In the banking sector, the government doesn't impose any specific restriction with respect to the foreign investment and therefore foreign banks mayoperateunderthebroaderpurviewoftheregulatedsystemandspecific supervision of relevant policy framework such as Banking Act 1959 etc (Rogers, Wong and Nelson, 2017). Besides,thehugecreditflowandcapitalformationwithinthesystemthrough sustainable credit practice has brought down the credit standards within the country. The inadequate risk management and improper assessment of the creditworthiness of the borrower are some of the major areas of consideration which foreign banks and the regulators may need to have while strategizing or executing their operations (Hurst, 2019). Considering the situation, it may be stated that the recent outbreak of coronavirus pandemic has caused significant losses to the global economy and Australians are also no exception to the same. The recent research conducted by United Nation revealed that the world may experience another depression post-2008, the impact of which may exceed that of the 2008 recession (Hurst, 2019). In such a scenario it will be necessary for the policymaker to adopt a sustainable policy set where banks will be provided sufficient credit for onward transmission to the borrowers and industries to maintain the production momentum (Atoom, Malkawi and Al Share, 2017). Also, people will be provided with liquidity so that the economy may get restored within next few years through consistent consumption (Black, Chapman and Windsor, 2017). In this context, the question may arise whether the foreign direct investment will be further liberated from its existing liberalised framework or the same should be controlled in a more stringent manner. In the Australia, Foreign Investment Review Board (FIRB) overseas the FDI operation across the sector and therefore it may be Page9of12
concluded that a well-designed policy framework supported by efficient leadership and governance through FIRB on banking and financial sector will help the country to achieve a long term goal of sustainability in the financial sector and the economy as a whole in the most time and cost-efficient manner (Atoom, Malkawi and Al Share, 2017). 6.0 Timeline The research has been targeted to be completed within 1 month, the brief timeline is shown herein: Thefirstweek–Structuringthepaper,visualisingtheconceptand conceptualising the outcome The second week – Collecting the data and listing of all sources The third week – Summarising the data collected and performing a literature review The fourth week – Reviewing the paper, running sense check, formatting, grammar checking and referencing etc. 7.0 Resources For the purpose of research, primarily the website of RBA has been referred. Besides, few peer-reviewed journal publications have also been referred. Also, some websites have been referred to get the idea of foreign banks’ operations within the country. All such references have been listed in the references or bibliography section below. Page10of12
Paraphrase This Document
Need a fresh take? Get an instant paraphrase of this document with our AI Paraphraser
References Atoom, R., Malkawi, E. and Al Share, B., 2017. Utilizing australian shareholders' association (asa): Fifteen top financial ratios to evaluate Jordanian banks' performance.Journal of Applied Finance and Banking,7(1), p.119. Black, S., Chapman, B. and Windsor, C., 2017. Australian Capital Flows.RBA Bulletin, June, pp.23-34. Geddes, A., Schmidt, T.S. and Steffen, B., 2018. The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany.Energy Policy,115, pp.158-170. Hurst, L., 2019. 14. The impact of Chinese state capital during the iron ore boom.THE CHINESE ECONOMIC TRANSFORMATION, p.287. Lien, B. and Sunner, D., 2019. Liberalisation of China's Portfolio Flows and the Renminbi| Bulletin–September Quarter 2019.Bulletin, (September). Ozkan, N., Cakan, S. and Kayacan, M., 2017. Intellectual capital and financial performance: A study of the Turkish Banking Sector.Borsa Istanbul Review,17(3), pp.190-198. Regan, M., 2017. Capital markets, infrastructure investment and growth in the Asia Pacific region.International Journal of Financial Studies,5(1), p.5. Reserve Bank of Australia. 2020.How Do Global Financial Conditions Affect Australia. [online] Available at: <https://www.rba.gov.au/publications/bulletin/2019/dec/how-do-global-financial- conditions-affect-australia.html> [Accessed 17 April 2020]. Rogers, D., Wong, A. and Nelson, J., 2017. Public perceptions of foreign and Chinese real estate investment: intercultural relations in Global Sydney.Australian Geographer,48(4), pp.437-455. Page11of12
Wójcik, D., Knight, E., O’Neill, P. and Pažitka, V., 2018. Economic geography of investment banking since 2008: The geography of shrinkage and shift.Economic Geography,94(4), pp.376-399. Wong, P.Y., Higgins, D. and Wakefield, R., 2017. Foreign real estate investment, residential tourism and the Australian residential property market.International Journal of Housing Markets and Analysis. Page12of12