'Something remarkable' as Australia sends money to the world, says Reserve Bank

In a development described as "remarkable" by the head of the Reserve Bank of Australia's international department Penelope Smith, the nation's net foreign liabilities - the difference between domestic assets owned by foreigners and offshore assets owned by Australians - has plunged.

Ms Smith said Australia's net foreign liabilities have dropped to 32 per cent of gross domestic product, the lowest point since the mid-1980s, after reaching 63 per cent of GDP in 2016.

"[This is] something remarkable," the RBA official said.

The nation remains a top destination for foreign investors - more than $106 billion flowed into the country last year, the seventh highest intake in the world.

But at the same time more than $195 billion poured out as investors sought opportunities abroad.

Ms Smith said the the fact that Australia had become a net exporter of capital was a major shift.

"Australia is a country with a lot of profitable investment opportunities, so for almost all of our history since colonisation, foreigners have invested more in Australia than Australians have invested overseas," she said.

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There was a surge in incoming investment after capital restrictions were lifted in the 1980s, and net foreign liabilities topped 50 per cent of GDP through most of the 1990s, the 2000s and 2010s, particularly to fund the mining boom.

But the ratio began trending down from the middle of the last decade and the process has accelerated since 2019.

Ms Smith said the development had "largely flown under the radar given the significant challenges posed by the COVID-19 pandemic and its aftermath".

Prominent independent economist Saul Eslake said the rise of the $3.5 billion superannuation industry accounted for much of the change.

Mr Eslake said superannuation funds had the expertise and resources to invest offshore in a way that individuals did not, and without them most of such savings would have gone on property and into bank deposits.

In addition to super investments, a lot of the money heading offshore is dividends to investors in the mining sector, which is profiting from strong international demand for Australian commodities.

But even when high commodity prices eventual fade, Mr Eslake does not think the country will return to the days when its current account deficit - the difference between money coming in and going out - regularly exceeded 6 per cent.

The strong outlook of super funds for investment was now "a permanent feature of daily life and will be sustained", he said.

The economist said the nation also benefited from the fact most of its debt was denominated in Australian dollars and so was unaffected by changes in the exchange rate.

Meanwhile, those investing offshore in US dollar denominated assets were benefiting from the currency's current weakness,

Mr Eslake said the low net foreign liabilities put the country in a strong position to weather any future shocks like an escalation in the Israel-Hamas conflict or another pandemic.

"Shocks are still shocks, and we are not immune from them, but we are better-placed to weather them than in the 1980s and better than many other similar countries are now," he said.