Australia and New Zealand remain among the world’s most attractive destinations for foreign direct investment, but rising costs, regulatory complexity and slowing competitiveness are threatening their ability to secure the next wave of global capital, according to new EY research.
While both countries continue to be viewed as stable and desirable investment destinations, investors are increasingly prioritising economies that can deliver projects faster, develop skilled workforces and provide greater policy certainty.
The EY Australia and New Zealand Foreign Direct Investment Attractiveness Survey, based on responses from 300 international business decision-makers, found Australia ranked fifth globally for investment attractiveness, while New Zealand ranked eleventh despite competing against much larger regional blocs.
Australia and New Zealand perceived advantages and disadvantages over other locations
| Biggest ANZ advantages | Biggest ANZ disadvantages |
| Quality of life, safety, diversity and culture | Labour costs |
| Political stability | Cost of energy |
| Policy approach to climate change and sustainability | Level of innovation and R&D |
| Availability of green/low carbon energy | Market size |
| Quality of workforce | Regulatory environment |
Source: EY, July 2026
Investors continued to rank quality of life, political stability and sustainability among the region’s greatest strengths, but the survey found those reputational advantages were not the primary drivers of capital allocation decisions.
Instead, workforce capability was the most important consideration when deciding where to invest, cited by 30 per cent of respondents, followed by labour and input costs (29 per cent), research and development and innovation (26 per cent), market size (21 per cent) and tax competitiveness (21 per cent).
At the same time, labour and input costs emerged as the biggest disadvantage of investing in Australia and New Zealand, identified by 30 per cent of respondents, ahead of energy costs (29 per cent), levels of innovation and research and development (26 per cent), market size (25 per cent) and the regulatory environment (25 per cent).
The findings suggest that while the two countries retain strong institutional advantages, they are becoming comparatively harder places for businesses to scale projects quickly and cost-effectively.
EY regional chief economist, Oceania, Cherelle Murphy, said Australia and New Zealand’s longstanding reputations would need to be backed by stronger execution if they were to remain competitive.
“Australia and New Zealand are still highly regarded by investors, but reputation alone will not be enough to win capital in a more competitive global economy,” Murphy said.
“The next wave of capital will be harder to secure. Investors are looking for economies that can commercialise ideas, mobilise talent and turn major projects into value,” she said.
The survey highlighted growing competition for investment in sectors including artificial intelligence, advanced manufacturing, digital infrastructure, clean energy and critical minerals, with governments increasingly competing on speed, capability and policy certainty rather than reputation alone.
It also found Japan, Europe and India were the top destinations where investors would redirect capital because projects could be executed more efficiently.
Meanwhile, just 16 per cent of respondents viewed Australia’s foreign investment approval process as “not at all restrictive”, compared with only 5 per cent in New Zealand, reinforcing broader concerns around regulatory complexity.
Despite these challenges, the report underscored the scale of foreign investment already flowing into the region.
“From 2015 to 2025, more than 4,600 foreign direct investment projects worth almost US$400 billion were announced across the two countries, supporting nearly 400,000 jobs,” Murphy said.
Murphy said improving competitiveness would require Australia and New Zealand to strengthen AI readiness, boost workforce capability and productivity, and improve tax competitiveness and investment certainty.
The survey found almost half of investors believed stronger technology infrastructure should be the top priority for improving Australia’s and New Zealand’s attractiveness for AI investment and innovation, while respondents also highlighted the need for greater investment in workforce skills, targeted migration settings and clearer pathways for specialised talent.
“Almost half of investors identified stronger technology infrastructure as the top priority for improving attractiveness to AI investment and innovation, but technology infrastructure is only part of the challenge,” she said.
“Investors have also pointed to the need for skills investment, targeted migration settings and clearer pathways for specialised talent to support workforce capability and productivity.”
Tax settings also emerged as an area of concern, with 19 per cent of respondents identifying unstable, unpredictable or uncompetitive tax policies as a leading risk to future investment attractiveness.
Murphy said long-term policy certainty would be critical if Australia and New Zealand were to compete for increasingly mobile global capital.
“Capital goes where it is treated best, and that means stable, predictable settings with tax rates that stand up to our competitors. These are the settings that will give businesses confidence to plan five to ten years ahead in our region,” she said.
