scroll to top
Stuck on your essay?
Get ideas from this essay and see how your work stacks up
Word Count: 1,254
Australian external debt Introduction Foreign debt is referred to also as external debt Foreign debt is distinguished from other kinds of foreign investment capital inflow such as foreign ownership because it carries with it the obligation to pay interest or to repay principal There is no single factor that caused the dramatic deterioration in Australias external position McGillivrayPapadopoulos 1995 The contributing factors are both internal and external When domestic interest rates are high relative to overseas interest ratesborrowing in overseas financial markets is attractive because of the lower interest rates while lending to individuals overseas becomes less attractive An increase in overseas borrowing leads to an increase in capital inflow while decrease in lending to the overseas sector reduces capital outflow Australia remains a major net importer of foreign capital as it has been for most of its history Without such capital Australias economic and employment growth would be lower Yet few people seem to understand that the deficit which Australia has on current account because importing more goods and services than it exports is the other side of a surplus on capital account Moreover unlike the large investment borrowings from overseas of the 1980s these capital imports are now apparently being used productively According to Reserve Bank 1994 report Australian current capital surplus of about 5 of GDP can be regarded as not dangerous by comparison with the same surplus in 1984-1985 As McTaggart et al 1999 says a country that runs a current account deficit must borrow capital from overseas to overcome that deficit and a country that runs a current account surplus lends to the other countries Over time if a country continues to run current account deficits it becomes debtor nation with stock debt owed to others Therefore Australia is debtor nation The level of Australias external debt has risen from very low levels in the 1970s to relatively high levels in the 1990s This also can explained by
@Kibin is a lifesaver for my essay right now!!
- Sandra Slivka, student @ UC Berkeley
Wow, this is the best essay help I've ever received!
- Camvu Pham, student @ U of M
If I'd known about @Kibin in college, I would have gotten much more sleep
- Jen Soust, alumni @ UCLA