- Australia’s Current account has almost always been in a deficit (a CAD)
- Contrary to (China, Japan, Germany),
- Except for the series of Australia’s CA Surpluses in the years since 2019-20
Current Account Deficit (CAD) as a percentage of GDP
- A key measure of an economy’s External stability is the current account deficit as a percentage of GDP.
- Looking at the size of outflows (CAD) Relative to the size of the economy (GDP)
The CAD as a trade deficit (trade balance)
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From the 70s onwards, Australia has not exported enough goods to cover their imports
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current account first emerged as a major problem in the 1980s
- the CAD was blamed on persistent deficits on the balance on goods and services
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Two key (dimensions) to the argument of the CAD being the result of a trade gap
- Australia lacks international competitiveness
- In many higher-value added areas of global trade
- such as elaborately transformed manufactures (ETMs)
- SEE Australia’s international competitiveness
- In many higher-value added areas of global trade
- Australia’s Terms of trade have a major effect on changes in the CAD
- Australia lacks international competitiveness
The CAD as a savings-investment gap
Pitchford thesis (consenting adults thesis)
- that interacting with international markets allows domestic firms to fund investment
- which creates employment and development within the economy
- Hence, overseas liabilities are acceptable
- if they are used to fund investment into industries that create money to pay back the loans