Comments on: Australia’s Current Account Deficit is a Disgrace

By: Comment by Josh

Comment by Josh — Tue, 01 Sep 2009 07:17:33 +0000

This hype about how bad the CAD is ridiculous, there is nothing that says specifically that having a CAD is a bad thing as long we have sustainable economic growth allowing us to finance it. Furthermore one reason we have a CAD is because we have such low levels of national savings and high amounts of consumption. This in comparison to Japan, who has a high levels of net savings and lower levels of consumption, but whats happening to them now? When their export earnings drop off significantly like what is happening now because of the Global financial crisis, they are unable to stimulate their economy effectively because of the nations tendency to save which limits the effectiveness of fiscal stimulus. Where as our economy is doing relatively well some might say because of our tendency to spend, allowing us to cope much better then other countries with global down turns.

By: Queenslander

Queenslander — Fri, 28 Aug 2009 21:30:58 +0000

One of the many things that worry me about the economy is who is paying back the debt? As I understand it, if a person works one hour per week it is deemed that that person has worked for the week and therefore is not counted as unemployed. If this is so, the 7 pct unemployed is probably far, far greater. The so called 'Temporary Defecit' much talked about a few months ago, has slipped from the Labour Govt agenda and the only thing that is/was 'Temporary' was the Surplus paid for by Australian taxpayers. A 'Temporary Defecit' is like a temporary mortgage, and that normally lasts for about 25-30 years!

By: Lilly

Lilly — Sat, 22 Aug 2009 14:15:20 +0000

"Its quite obvious that such a current account deficit is bad, but why in light of this in our Dollar appreciating."
Increased borrowing from overseas, means more capital inflow, meaning a greater exchange of $OS to $Aus - increased demand for $Aus -> appreciation.
Right? (year 12 economics)
And CADs not so bad exactly as smart said.

By: Ross

Ross — Fri, 05 Jun 2009 00:53:18 +0000

Sorry smart. I will say it nicely but must agree entirely with John James. The CAD combined with services economy expqansion and asset price infaltion only possible by crony ticket clipper credit wrapping foreign issued bonds and misdirecting them into the residential and commercial real estate bubbles produces the mother of all multipliers which whoops up GDP for mugs like McKibbin and all the Keating era travellers to promote as a responsible debt service ratio.

Well mate when the bubble pops the great muliplier becomes equally the equally great contractor and we still owe the money. Foreign capital wasted on unproductive urban assets and the tcket clipping rent takers like we have and as John James implies we have not only just put our Grandkids inheritance up against wall but we have eaten their daily bread for the next twenty years.

By: John James

John James — Thu, 04 Jun 2009 14:10:45 +0000

Ur an idiot! we rely on foreign savings to fill the gap between domestic savings and investment. (AD>AS)!
That is the CAD promotes economic growth. and isnt it a coincidence that as economic growth increases the CAD increases???

nevertheless 99% of debt this is from the private sector so as long as the investment that is being funeded by overseas capital inflow generates sufficients returns to pay for the sercivngs costs in the future; the increase in foreign liabilites can be viewed as sustainable in the future

By: smart

smart — Thu, 24 Jul 2008 08:32:44 +0000

everyone seems to be forgetting that the CAD really isnt that bad. In the 1980's the CAD was bad and the debt servicing ratio was 20%. Today the debt servicng ratio is 11% and australia is more competitive. you might also want to read about the "Pitchford Thesis" it has some interesting stuff on CAD

By: Australian

Australian — Tue, 20 May 2008 12:57:17 +0000

Dear Tasmanian

In response to your question, although it may be difficult for you to understand, the nation of Tasmania is located off south coast of Australia.

Sorry for the confusion there.

By: A.J

A.J — Fri, 16 May 2008 01:56:28 +0000

What about Australia's Financial & Capital balance? That is well into the deficit. People should not look only at the CAD on goods and services because the Australian dollar is appreciating.

By: Tasmanian

Tasmanian — Thu, 24 Apr 2008 03:26:52 +0000

This is a bit of topic but i must complain about the logo at the top of the page.

Where is Tasmania????!

This always happens!! Why does everyone leave it out?

We are part of this country as well - prejudice.

By: Scotty

Scotty — Thu, 14 Feb 2008 09:25:11 +0000

What about the fact that Australia's net national income deficit has remained around 4% of GDP, almost two-thirds of the CAD it is not just the Balance of Goods and Services (imports vs. exports). However indeed the 'Wealth Effect' has kicked in with Australians rewarding themselves with excessive purchase of imports, but i don't think this is yet a 'disgrace'. Yes ultimately inflation will be exerienced. But i believe the Reserve bank will be able to curb spending and this spending will most likely drop off in the imported sector thus narrowing the BOGS deficit. In comparison to America, whether or not they became a consuming economy years ago, they still run a bigger deficit than Australia (in terms of % GDP) and with a positive net national income this is made up entirely of a massive trade deficit funded by foreign liability. Great article though - good to see a change from economists saying that the increasing CAD is nothing to worry about.