Last minute short answers for everyone! (1 Viewer)

[Bobbo1]

1) Outline recent trends in Australia's net foreign liabilities (2 marks)
2) Explain the relationship between net foreign liabilities and the balance of payments (3)
3) Distinguish between debt and equity as a method of financing Australia's CAD. (3)

 

[Lis020393]

1) Australia has sustained high level of net foreign liabilities over the past decades due to a combination of our low national savings levels and the savings and investment gap. However, the current sustained appreciation of the $A has decrease the $A value of interest servicing costs on foreign liabilities thus reducing our CAD relatively, recorded at 5.3 billion in the June quarter which is half of the CAD figures in the March quarter

Can you answer 2 and 3 because I'm not sure. Are those questions from HSC past papers or independent/CSSA papers?

 

[willstylz]

3) a deficit on the current account presupposes financial inflow on the capital and financial account, either in the form of borrowings from overseas (foreign debt) or through selling equity in items such as property or companies (foreign equity). This will mean that lenders may become more reluctant to lend to aus or to invest in aus. [extract leading edge economics textbook - 2011]