Australia’s net foreign debt has reached beyond $1 trillion for the first time on record.
According to “Trading Economics,” internal debt in Australia increased to $190, 7269 million in the third quarter of 2015 from $181, 5720 million in the second quarter of 2015
Figures released by the Australian Bureau of Statistics also show that the quarterly current account deficit has blown out to $21.1 billion, the second deepest deficit since the data was first recorded in 1959.
The December quarter recorded just $31.3 billion worth of new investment – the lowest volume since March 2011 and down 4% on the September quarter. Worst was a horrific 17.8% drop 12 months ago according to “The Guardian.”
Two decades ago, foreign debt was at the centrepiece of Coalition criticism of Labor’s economic management. When it became an issue when John Howard won in 1996, net foreign debt was hovering around $190 billion – 37% of GDP as stated by Stephen Koukoulas.
In September 1995, six months before the election which swept Howard into power, he said, “I can promise you that we will follow policies which will, over a period of time, bring down the foreign debt … our first priority in Government economically will be to tackle the current account deficit.”
It failed to do this. Indeed, since the Coalition returned to power in September 2013, net foreign debt has risen by $142.6 billion or a stunning 6.5% of GDP.
The result drove Australian terms of trade. The ratio of export prices to import prices or the amount of import goods an economy can purchase per unit of export goods dropped by 3 percent.
This is a decade low and more than 30 percent below the peak reached in 2011.
Stephen Koukoulas further said that national debt and deficit worries seem to have taken a back seat to fear and anxiety about government and housing debt. Yet it remains a potential problem for Australia. This is because it leaves Australia vulnerable to the whims of foreign investors.