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The Causes Of Current Account Deficit.

974 words - 4 pages

The causes of current account deficitAustralia's CAD will be one of the entering years biggest economic stories in the media at the end of the financial year 1998-1999. There is a likelihood the deficit will increase to an amount to per 6 percent of gross domestic products.In Australia for the last two centuries the balance has almost been deficit the past twenty yeas the level of the deficit has increased notably. In 1970's the current account gap has concerning 2.5 percent GDP.Australia has usually run a current account s deficits, as investment opportunity have exceed domestic saving, the budget paper say the deficit has also been quite explosive periodic inflorescences on sawing and inaugurations. E.g. changes income stemming from the dangle habits has been maintained investment cycled have also been a key diver of short-term instability in the CAD.Australian's needs to spend more on investment and all Australian's save is the cause of the current account deficit. The investment projects have created jobs, increased living standard for all Australians and have helped generate the income necessary to make payment in the imported foreign capital the current account is not just about trade it's also we must lift our national saving performance if are to reduce the current account deficit.The current account deficit stood at $3,487 million in the June quarter, down from $4,291 million in the March quarter. As a proportion of GDP, the current account deficit stood at 2% of GDP in the June quarter, the best result in just over 21 years (March quarter 1980). However, when we borrowing from other countries we have to pay interest rates and these are additions to the original dent, therefore they increase the debt owed. It is considered a bad thing to have and increasing current account deficit because we are borrowing from them and then repaying them even more, Due to a foreign economy.Housing and constructionLarge swing in housing construction activity can have a significant effect on the total economy. New housing construction, plus alterations and addition, accounts for about 5% of total Australian GDP.It's the graphs shows in the fast month the finance and the building approvals numbers have been very strong to help the housing sector recover from the effect of GDP the actual housing construction will be making contribution to the GDP growths.The fall private net lending is the result of the result of both a rise in investment. The private saving rate in part to households and times maintaining spending at desired levels in the face of slower income growths result from weaker export return.·The CAD is forecast by Treasury to stand at AUD20 billion in 1996-97 - the same as in 1995-96 - or around 3.75% of GDP.·This implies that the current account deficit will increase somewhat over the remainder of the financial year.·Export growth in 1996-97 is forecast to be outstripped by import growth, which is expected to pick up due to...

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