Just make a comment on how in recent years Australia's CAD has been less of a worrying economic indicator (through the pitchford thesis), as a sustained high CAD is a result of increased foreign investment needed for economic growth in Australia as our private savings levels are low. In saying this though you would have to role off a couple of ways policies can be used to achieve external stability, which as well as the CAD includes foreign liabilities and the fluctuating australian dollar (so don't limit your responses to policies that address the CAD). Look at monetary and fiscal policies, both contractionary and expansionary that would either encourage investment in the Australian economy (increasing aggregate demand) or encourage savings (aggregate supply), where you could argue (through stats) that the government could use either contractionary or expansionary policies to maintain a low CAD, stable AUD and lower the amount of foreign liabilities Australia owes to foreign investors. If you get your head around the theory this question can be easy to answer.
