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External Stability (1 Viewer)
- Thread starter ashwin
- Start date
Because controlling the CAD limits economic growth, and also because the government has shifted focus to achiveing budget balances over the course of the economic cycle, since it has acknowledged that Australia is, by definition, a capital importing nation that relies on foreign investment, and this causes an increase in the CAD - this isn't necessarily a bad thing anymore.
Don't have any sites, but ur teacher should have newspaper articles on this stuff
Don't have any sites, but ur teacher should have newspaper articles on this stuff
Newbie
is a roflcopter
- Joined
- May 17, 2003
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- 3,670
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- HSC
- 2003
letting the CAD go outta control also restrains growth
there was a switch over to debt borrowing rather than equity in the 80's blah blah
financial dereg. made borrowing easier and cheaper blah blah
PTEs have crap management and borrowed alot blah blah
there was a switch over to debt borrowing rather than equity in the 80's blah blah
financial dereg. made borrowing easier and cheaper blah blah
PTEs have crap management and borrowed alot blah blah
The govt has failed to control the cad/fd, rather it has paid off most of its fd and mostly what remains is a private sector cad. The CAD is also cyclical and since Australia's economy is much stronger than the global economy's atm, we are importing more, exporting less and consequently the CAD has balooned. But this is mostly private sector so the govt doesnt give a stuff - see Pitchford Thesis
B
Bambul
Guest
The government has attempted to increase national savings through running budget surpluses and compulsory superannuation for employees. This allows the private sector to obtain funds from domestic savings without having to go overseas and this puts a downward pressure on the CAD.
There is an argument that a CAD is sustainable and that the only large deficits that matter are public sector deficits (eg. the large deficits run by Latin American countries in the 80's which resulted in what is sometimes refered to as Latin America's "Lost decade"). If consenting adults from the private sector cause a high CAD, the srgument goes, it shouldn't be of much concern as it will eventually lead to higher economic growth.
Finally there is the argument that looking at the structural CAD (Net incomes) by excluding the structural CAD (Balance of trade) is more important and even though the CAD has increased recently, it has been almost completely due to a deterioration in the trade balance, not in net incomes. As a result, the structural CAD hasn't altered much and a high CAD is less threatening than it otherwise would have been.
There is an argument that a CAD is sustainable and that the only large deficits that matter are public sector deficits (eg. the large deficits run by Latin American countries in the 80's which resulted in what is sometimes refered to as Latin America's "Lost decade"). If consenting adults from the private sector cause a high CAD, the srgument goes, it shouldn't be of much concern as it will eventually lead to higher economic growth.
Finally there is the argument that looking at the structural CAD (Net incomes) by excluding the structural CAD (Balance of trade) is more important and even though the CAD has increased recently, it has been almost completely due to a deterioration in the trade balance, not in net incomes. As a result, the structural CAD hasn't altered much and a high CAD is less threatening than it otherwise would have been.
malayz_angel
Member
Yeah all of the above *Grins*
KillerIsMe
Very Special Master
look up the pitchford thesis, that will help.