Effects Of Rising Foreign Debt On Australia

Australia’s net foreign debt to GDP ratio has grown dramatically during the period of globalisation. After rapid growth in the 1980s’ foreign debt stabilised at roughly 35% of GDP, this was party due to a higher level in asset sales being used to fund the CAD instead of increased debt. Debt began to increase again the late 1990’s, this was due to a decrease in the value of the Australian dollar, because most of our debt had been borrowed in foreign currency’s, the depreciation increased the Australian dollar value of our foreign debt. The slower rate of growth in debt and overall liabilities in the past few years reflect the lower level of current account deficits. The growth in net foreign debt has eased slightly since the global financial crisis of 2008-09 but is now around 50% of GDP.

The United States has been in debt since 1775, paying for the American Revolutionary War. Through many years, tremendous debt has built up. America is now at a total of $19 trillion dollars. There are many dilemmas dealing with our economy, this all starts with America’s debt. The government has overused its authority in regard to America’s national debt by erratic spending, excessive borrowing, and by ignoring the average tax paying American.

The United States deficit contributes to its debt and the debt contributes to the deficit. We know the longest running uninterrupted surplus for the Unites States was from 1920 to 1930 but spent most of it combating the war. This will show how the U.S. deficits, debt, and surplus affect the following areas; the taxpayers, future social security and Medicare users, unemployed individuals, University of Phoenix students, The United States financial reputation on an international level, a domestic automobile manufacturer (exporter), and a Italian clothing company (importer).

The Australian economy marks external stability as an important objective because it can influence other important aims such as economic growth, unemployment and inflation. External stability is the concept of sustaining a nation’s external accounts so that in the future, it is able to service its foreign liabilities and can avoid currency volatility. When looking at external stability, we must examine Australia’s balance of payments, which records all economic transactions between Australia and the rest of the world. Australia’s balance of payments has two components, which is the current account and the capital and financial account. The current account measures the receipts and payments for trade in goods and services, transfer payments and income flows, while the capital and financial account shows international borrowing, lending, purchasing and sales of assets.

Australia’s government has helped to intervene within the market when issues have arisen. The more efficient allocation of resources and income is an initiative designed to assist the society. Unfortunately, it can also cause costs to the community and market which can be seen from side effects of their policies. The tight and loose monetary policies that are used can cause unemployment and inflation which are both a cost for the economy. The government also imposes tariffs which causes unfairness for consumers.

Employment in Australia is on the rise with most people who are willing and able to work now having the opportunity to do so. Economists consider 5% unemployment which was the value in January recorded by the Australian Bureau of Statistics. Greater number of jobs created because of factors such as the mining boom and the recovery effect in Queensland because of the floods will further lower the unemployment rate. This will have the effect of consumers having more disposable income thus requiring an increase in long term interest rates.

Whenever the topic of the American Economy is mentioned the first thing that pops in our heads is,”debt”. The debt of the U.S. has been a controversial topic for years now, especially in our politics. The U.S. debt as if now is 18 trillion dollars, but we didn’t always have this debt.

The United States of America has carried some amount of federal debt every year since the country was founded. From this empirical evidence, it can be said that debt itself is not damaging to an economy. After all, the country has had periods of rapid growth and economic booms while carrying different amounts of debt. It is also plain to see that a very large amount a debt, an amount that could not ever be eliminated without unreasonably inflating the dollar, could have devastating effects. The US dollar is a fiat currency, which holds value only when holders of the currency have confidence in the issuing institution, in this case the US government. In the event the government could not repay its debts, the value of the currency would drop as people lose confidence. The effects on the US economy, households, businesses, trading partners and foreign governments would be disastrous and widespread.

In today’s hectic world of politics there are many talking points and issues that require attention. National debt has been a key issue in the past that has gotten a lot of attention of the public and in the general elections. National Debt or Federal deficit is the total amount of money the government has borrowed from any source. The national debt in the United States is currently $15,236,332,233,848.35 and growing. The national debt per U.S citizen is about $48,852.95. These numbers are made up of public debt and Intergovernmental Holdings. Over the past 50 years national debt has increased exponentially. The national debt of the United States is very important to the US economy because the U.S has the biggest economy and is a major world super power. Issues such as National debt stir up public interest and gain a lot of attention because it affects the job market and peoples investment. There are many causes and effects to the increase of the national debt and there are different opinions and ideas on how to resolve this issue.

The Australian Government did not work to improve or support primary production within Australia. Throughout Australia’s early history it relied predominantly upon primary production of goods and crops; including wool, wheat and cattle. Funds that Australia borrowed from overseas countries were mainly to boost the primary industries. The government believed that they could repay loans at a later date. To receive sufficient profits from the

When α government spends more thαn the revenue collected from tαx, tαriff, αnd other fee revenues, it must borrow to cover the deficit it fαces which when αccumulαted over the yeαrs becomes the nαtionαl debt. Internαl αnd externαl debts αre the two types of nαtionαl debt. Internαl debt includes the αmount borrowed from sources within the country. The government rαises this money by selling securities, government bonds, αnd bills. While externαl debt is the money borrowed from foreign sources. These sources mαy include privαte sources, other countries, αnd the Internαtionαl Monetαry fund. This pαper will explore the reαsons αnd consequences of the high nαtionαl debt fαced by the United Stαtes of αmericα. Furthermore it will αlso discuss wαys the reαson for this excessive spending cαn be eliminαted or reduced. economists forecαst thαt by 2030 the current αccount deficit would surge up to $5 trillion on αnnuαl bαsis which would constitute up to 15% of the country’s GD. This entire deficit will cumulαtively contribute in further inflαting the level of foreign debt thαt would burden the economy which would imply greαter imposition of bαck-breαking tαxes on the people of the country.

Theoretically speaking, a country in debt is not a bad thing, unless it leads to deficit. There’s a limits to debts, once crossed then it leads to deficit. Deficit is whenever the amount of debts is higher than the amount it’s supposed to be. The economic status of a country is important, the moment it hits recession; the situation is not as good as it should have been without it. Being in this default leads to a bad financial activity to the country. Greece, Italy, Germany and some other western countries are examples that have recession or might think they do. It this paper, Paul Krugman’s point of view of the liberal party in Canada’s decision will be discussed and explained. Also, as of the austerity that is going on in some of the western countries mentioned above.

The Australian economy can both have positive and negative affects on FASTA. To start, in reference to Reserve Bank Australia, the inflation rate is 1.9%, employment growth is 3.0%, cash rate is 4%, GDP growth rate is 3.5%, wage growth is 2.1%, average weekly earnings are $1,192.00, and finally the Australian dollar equals $0.75 US dollars. In analysis, the inflation rate, cash rate, wage growth and employment growth are beneficial to the business since the businesses expenses aren’t as high as it would be if the Australian economy was booming. As an effect this will cause FASTA to be able to have expansion and improvements such as, more efficient machinery at a lower cost, while also reducing the amount to be expended on operational expenses. However, the main negative effect of the Australian economy on FASTA is the decrease in sales due to the customers struggling to afford products.

I would like to start with a famous Alexander Hamilton’s quote “A national debt, if it is not excessive, will be to us a national blessing”.

Blyth defines austerity as “the ‘common sense’ on how to pay for the massive increase in public debt caused by the financial crisis”, which comes primarily through the elimination of government services. People knowingly take on debt with the intention to then pay it off-- before the financial crisis of 2008 people took on debt to pay bills and banks took on debt to make money by leveraging. When the crisis hit, the government felt the banks were “too big to fail” (because a crucial part of economic activity in the US is tied up in liquidity of the largest banks) and bailed them out. When a person’s debt becomes too high they pay it down with income rather than continuing to spend and pump money into the economy, or “deleveraging”. In