Australia as an International Financial Services Management Centre : an assessment

In general, a financial centre can be defined as ‘a place in which there is a high concentration of managed financial institutions and financial markets performing activities which are internationally recognised for their management efficacy, efficiency, and legal standing. In this study we construct a number of traditional and alternative measures to assess the importance of Australia as an International Managed Financial Services Centre relative to other major centres. In particular we draw comparisons between inward/outward international investment positions and the exports of financial services. Due to data limitations, these measures are compared on a country rather than on a city level on which activities of an IFC should be based. Australia’s financial sector (gross value added) relative to the overall economy is very similar to that of many other developed economies, such as the US, UK, Japan and Canada, but significantly less than a number of overseas financial centres, most notably Luxembourg, Hong Kong and Singapore. In general our study confirms previous results which support the existence of a positive relationship between an economies openness and inward financial sector direct investment. Furthermore we find that institutional investor’s country credit rating, microeconomic and institutional factors of country such as government efficiency, business environment and infrastructure were all positively and significantly related to direct investment of financial services