National security concerns and increased government restrictions loom large over foreign direct investment (FDI) in Australia and the United States, according to a new Index developed at the United State Studies Centre (USSC). 

Though pandemic-fuelled economic disruptions weighed heavily on cross-border capital flows, the Foreign Investment Uncertainty Index developed by USSC Director of Trade and Investment Dr Stephen Kirchner reveals national security concerns also had negative impacts on investor confidence in 2020.

“Australia is more susceptible to foreign investment uncertainty compared to the United States,” Dr Kirchner says, “and while cultural attitudes to foreign investment have a role to play, the Index shows that policy uncertainty is more volatile in Australia.”

In 2020, Australia’s average level of foreign investment uncertainty nearly doubled from the four quarters of 2019. According to Dr Kirchner’s research, the 2020 increase is attributable to the government lowering the FDI review threshold at zero dollars and introducing a new national security test.

“In previous years, uncertainty was driven by specific high-profile transactions which tested the opera­tion of Australia’s foreign investment framework,” Dr Kirchner explains, “whereas in 2020, changes in the framework itself generated the most uncertainty.”

Like Australia, the Index shows the United States experienced a recent increase in uncertainty, fuelled by national security concerns and changes in 2018 which expanded the scope of its FDI screening. However, escalated national security concerns regarding FDI regulations may prove lucrative for the US-Australia alliance. Given the close security ties between the two countries, Dr Kirchner argues this gives the already-strong bilateral investment relationship a competitive advantage.

Moving forward, the report highlights the need for both governments to clearly and transparently articulate reasons for rejecting foreign acquisitions to minimise uncertainty and adverse economic impacts.

“Around 20% of investment spending in Australia is done by foreign-owned firms. By utilising the Foreign Investment Uncertainty Index, policymakers can now glean invaluable insights into the extent of the uncertainty, its potential economic impacts, and implications for government policy.”

A Foreign Investment Uncertainty Index for Australia and the United States is now available for download.

To book a briefing with Dr Kirchner, please email us at

Key points

  • Increased prominence of national security concerns in FDI regulation is likely to see elevated levels of policy-related uncertainty in both Australia and the United States.
  • The close security relationship between Australia and the United States is expected to drive growth in bilateral investment spending in times of heightened uncertainty.
  • The Index revealed historically lower levels of foreign investment uncertainty in the United States due to a more narrowly focussed regulatory review process.
  • Restrictions in Australia’s FDI review threshold and a new national security test saw foreign investment uncertainty double from 2019 to 2020.
  • Governments should clearly and transparently articulate reasons for rejecting foreign acquisitions to help minimise uncertainty and its economic effects.

To book a briefing with Dr Kirchner, please email us at

Media enquiries

Taylor Mellor
T 02 9114 2622