Australia has fallen two places to 12th in Kearney’s 2026 Foreign Direct Investment Confidence Index, with the consultancy warning that competition for global capital is intensifying even as investors remain broadly positive on the local market.Released by consultancy Kearney’s Global Business Policy Council, the annual index ranks the markets that global executives believe are most likely to attract foreign direct investment (FDI) over the next three years.
The 2026 survey, conducted in January 2026 among more than 500 senior executives from leading corporations worldwide, found 88 per cent of respondents planned to increase their foreign direct investment over the next three years.
Kearney said Australia’s slide came as the global investment environment faced growing pressure from geopolitical tensions, expanding industrial policy and accelerating technological competition.
“Australia’s two-place drop in this year’s rankings is a reminder that competition for global capital is intensifying,” said Sarovar Agarwal, managing partner, Australia and New Zealand.
“While the market’s openness and long-term appeal remain intact, investors are recalibrating their decisions against a backdrop of geopolitical uncertainty, shifting industrial policy, and technological change – and no market can afford to stand still.”
Despite the decline, Kearney said Australia remained one of the most open OECD economies to foreign direct investment, supported by economic liberalism, political stability, a transparent legal system, a strong growth trajectory and participation in major trade agreements.
Economic performance was identified as Australia’s leading investment drawcard, cited by 29 per cent of respondents as the primary reason to invest, followed by natural resources and infrastructure quality, both at 28 per cent.
The report also pointed to rising interest in critical minerals, with increased M&A activity in lithium and rare earth minerals contributing to a 6 per cent rise in natural resources being viewed as a strong reason for investment.
Mining remained the most attractive sector for FDI, drawing capital from the US, Japan, the UK and the EU, while growing US efforts to secure critical mineral supply chains independent of China were further supporting flows into Australia’s resources sector.
Kearney said Australia’s case-by-case approach to foreign investment proposals, alongside revisions to the 2015 Foreign Acquisitions and Takeovers Regulation and Guidance Notes, had helped reduce bureaucratic hurdles.
“This year’s report highlights some strengths as an investment destination – with investors prioritising economic performance, natural resources and infrastructure quality. Investors remain optimistic about investment here in Australia but there is some work to do to climb back up to where we were pre-COVID,” Agrawal said.
The firm also noted investors were no longer prioritising Australia’s talent and skilled labour pool as a key strength compared with last year, which it said could reflect a decline in skilled migration, labour productivity concerns and stronger demand for AI-skilled workers.
Globally, technological innovation emerged as a defining factor in investment decisions, overtaking more traditional considerations such as regulatory efficiency and domestic economic performance.
Kearney said investors cited technological innovation as the strongest or joint-strongest reason to invest in 10 of the 25 markets on the index.
The US retained its position as the world’s most attractive FDI destination for the 14th consecutive year, while Japan rose to third place and China climbed to fourth, as Asia claimed the largest share of markets on the index for the first time in more than a decade.
Executives also flagged geopolitical tensions as the most anticipated development over the next year, cited by 36 per cent, followed by commodity price increases and political instability in developed markets, both at 30 per cent.
Meanwhile, 84 per cent of global investors said industrial policy was extremely or very important in determining where they invest.
