The Australian

By Andrew Burrell

The battle between the US and China for economic supremacy in Australia has escalated after the US government’s Export-Import Bank revealed it would make a record $5 billion in cheap loans to projects here this year, a move that highlights the $1 trillion investment relationship between Australia and the US.

Analysts said the move, which has made Australia the bank’s top global destination for financing, sent a strong message to China that ‘‘the US has a lot of friends’’ in the region and symbolised the strength of Australia-US ties. 

Ex-Im Bank chairman Fred Hochberg, one of US President Barack Obama’s top economic officials, told The Australian yesterday that US economic activity in Australia had hit record levels during the resources boom, even as investment from China had grabbed most of the headlines.

‘‘US investment is frankly far greater than any Chinese investment in Australia — it’s the No 1 source of FDI (foreign direct investment) into Australia,’’ Mr Hochberg said after touring the Australia Pacific LNG project on Curtis Island in Queensland.

‘‘So maybe the Chinese investment is the bright new kid on the block but it pales in terms of what US investment has been.’’ Mr Hochberg said his export credit agency had authorised only about $US500,000 in loans for Australian projects in 2008 but this year it had already lent more than $US3bn ($2.86bn), with another $US2bn-plus likely to be completed by the end of the year. 

The low-interest loans are directly linked to the involvement of American companies — including Bechtel, GE and Caterpillar— on major projects.

They are designed to boost American exporters as rivals led by China and Japan compete with the US for major contracts. Australian Strategic Policy Institute chairman Stephen Loosley said US investment in Australia tended to be overlooked and Ex-Im Bank’s increased presence was ‘‘an extraordinary vote of confidence in Australia’s economic future’’.

‘‘It’s not surprising we’ve moved to No 1 given the fact that Americans look at Australia and say Australia’s economic performance is astonishing in comparative terms and absolute terms,’’ he said.

‘‘We’re seen as a very safe destination for American investment.’’ 

The dean of the University of Sydney’s business school, Geoffrey Garrett, said the US bank’s decision to focus on Australia had sent a strong message to rival nations. He said the move was ‘‘symbolic’’ and came after Mr Obama unveiled plans to boost the US presence in Asia to counter the rise of China.

Ex-Im’s lending would be ‘‘much more acceptable’’ to an Australian audience than Chinese investment, which had been highly controversial, he said.

‘‘It also reminds the world — and most importantly China — that China might have a lot of trading partners but the US has got a lot of friends with whom it can work very closely,’’ he said.

Professor Garrett said cumulative US investment in Australia topped $550bn between 2005 and last year, compared with $20bn for China, and had been led by energy giant Chevron’s decision to proceed with its massive Gorgon and Wheatstone LNG projects in Western Australia.

‘‘US investment here is booming,’’ he said.

Mr Hochberg said Ex-Im Bank was in talks with Gina Rinehart’s planned $9bn Roy Hill iron ore project in Western Australia to provide loans. The Roy Hillfinancing would be the US Ex-Im Bank’s second biggest in Australia after it authorised a $US2.95bn loan in March for the Australia Pacific LNGproject in Queensland, a joint venture between Origin Energy, China’s Sinopec andUS company ConocoPhillips.

The bank also made a $US280mloan last month to Australian company NewSat to help fund the nation’s first planned commercial satellite. That loan was the first involving Lockheed Martin as the exporter.

Ex-Im Bank is an independent federal agency that helps create US jobs by ‘‘filling gaps in private export financing at no cost to American taxpayers’’. It provides a variety of financing mechanisms, including working capital guarantees, export-credit insurance and financing to help foreign buyers purchase US goods and services.