Includes how major projects are financed and gives examples where relevant. Explains activities of the multilateral development banks in and other aid-funded projects where procurement is open to U.S. bidders
Last Published: 7/24/2018
In Australia many national and international financial management companies provide the complex financial structuring services required to fund projects using the most competitive package available for a particular project. Long-term debt financing is available from a variety of sources and methods. These include:
  • Banks
  • Retail investors
  • Government loans
  • Export credit agencies
  • Credit enhancement agencies
  • Bonds
  • Formation of national and international banking consortia
  • BOOT (build, own, operate, and transfer)
  • Direct investment by local and international companies
  • Loan syndicates
  • Joint ventures
Project financing includes finance from non-participants (i.e., loan funds by financial institutions) and finance provided by participants (shares in a stock company), as well as a host of hybrid arrangements. US companies participate actively in all types of project financing in Australia.

Traditionally, banks have provided project finance term debt and currently are the only source of project credit. While other sources might fund project loans, funding is undertaken only on the basis of bank credit enhancement through a bank guarantee or letter of credit. The development of new and innovative funding mechanisms is a key element in financing projects and infrastructure development, as public projects at the federal, state, and local levels become available for privatization.

The major trading banks have dominant ownership of the major finance companies, which control about 75% of the total assets of the industry. Commercial banks are the major source of medium-term loans. A wide range of merchant banks operate in Australia, many of which are associated with some of the world’s largest financial institutions. They also provide short to medium-term funding.

Venture capital is usually available from management and investment companies, which are funded by tax-deductible capital subscriptions. Other alternatives include: obtaining funds from finance companies (including leasing arrangements), building societies, credit cooperatives or unions, insurance companies, pension and superannuation funds, and cash management trusts.

The larger finance companies obtain their funds mainly by public issues of debentures and unsecured notes, with terms of up to five years. Syndicated lending by Australian and overseas banks provides long-term financing. A specialized market exists for direct borrowing and lending on an unsecured basis between large, well-established companies. Factoring of book debts can be arranged with finance companies, but it is not a widespread practice.

Unlike their US counterparts, Australian banks are free to participate in virtually all forms of financial services, including overdrafts (a traditional form of borrowing), fixed-term loans, commercial bills of exchange, letters of credit, domestic and international debt and equity issues, underwriting, leasing, and Eurocurrency borrowing. A wide range of non-bank institutions also provide financial services.

Several US Government agencies, as well as state and local bodies, offer programs to assist US exporters with their financing needs. Some are guarantee programs that require the participation of an approved lender; others provide loans or grants to the exporter, or to a foreign government. Many of these financing and guarantee programs apply only to high-risk or developing countries. Therefore, most business dealings with Australia do not qualify for coverage.

The Export-Import Bank of the United States (Ex-Im Bank), the US Government's trade finance agency, offers numerous programs to finance and facilitate US exports through loans and provides guarantees and insurance for loans from commercial sources. Although Australia participates in Ex-Im Bank programs for major projects, such as commercial aircraft sales, there is relatively little Ex-Im Bank activity in Australia.

Other organizations fill various market niches. A group of large banks owns the Private Export Funding Corporation (PEFCO), which makes Ex-Im Bank-guaranteed loans to foreign purchasers of US goods. The US Department of Agriculture offers a variety of programs to foster agricultural exports. The US Small Business Administration addresses the international trade needs of small US exporters.

Because Australia is an industrialized country and a donor nation to the multilateral development banks (MDBs), lending institutions such as the World Bank and the Asian Development Bank do not operate here. Like other prosperous countries Australia has a large pool of private funding available for debt financing of projects.

The World Bank and Asian Development Bank’s support for development projects in the developing countries of Asia provides opportunities for American/Australian consortia to compete for MDB-funded contracts. Australian companies often have established relationships in the region and are in a strong position, when teamed with US companies, to offer very competitive bids and performance qualifications.

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.