No External Stability since 2002 (1 Viewer)

[Zak Ambrose]

i was at an economics lecture on the holidays. the lecturer said external stability has not been a government concern since 2002. does anybody know if this is true? i have never read it or heard it from any other source. and if so, has the Rudd government brought back ES as an issue due to the budget deficit?

 

[wolfhunter2]

I doubt it is of no concern, as the level of private sector debt has reached little over 60% of GDP (that was until last year) , and we have too narrow of a trade base, which causes massive problems with our trade index once we have a commodity crash, as well as our low level of domestic savings (negative until last year). maybe what he meant to say, was the level of government debt, and stability concerned with that has not been a concern since 2002. Which is roughly true, due to the levels of public debt being so low in that period.

 

[williamc]

I doubt it is of no concern, as the level of private sector debt has reached little over 60% of GDP (that was until last year) , and we have too narrow of a trade base, which causes massive problems with our trade index once we have a commodity crash, as well as our low level of domestic savings (negative until last year). maybe what he meant to say, was the level of government debt, and stability concerned with that has not been a concern since 2002. Which is roughly true, due to the levels of public debt being so low in that period.

to be honest thats all a bit of HSC jargon. From what i've read and learnt our external stability problem won't really be noticed by the government (not just economists looking for a good story), UNTIL our international investors start withdrawing their funds. Whether this means it will take a rapid depreciation of our currency for the government to really voice their concern over our large level of private sector debt is yet to be seen. I guess that have been trying to improve savings (through superannuation initiatives) which in turn should THEORETICALLY lower our debt levels through capital substitution. There is even debate among economists as to which there is even a problem with these levels of debt.