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June 20, 2024, 07:24:17 am

Author Topic: Causes of Australia's NFD  (Read 2042 times)  Share 

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Seamus Wong

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Causes of Australia's NFD
« on: May 16, 2019, 08:46:19 pm »
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Can someone give me their explanation of one factor that contributes to Australia's Net Foreign Debt?

Here is what I've written, I just wanna know how other people would answer the same question...

The savings-investment gap is one the leading factors contributing to Australia's NFD. The lack of domestic savings relative to high levels of investment by Australian households firms and the government has lead to shortages in the availability of credit, causing demand-pull inflation and pushing up the cost of credit - i.e. causing Australian Interest rates to rise to relatively high levels. This therefore leads to a dependance on foreign debt through the issuing of bonds or acquiring loans to finance our investments, increasing financial account credits and thus contributing to Australia's NFD. Furthermore, the fact that interest rates abroad are relatively cheaper increases the attractiveness of foreign debt, further adding to financial account credits and thus Australia's NFD.

Please let me know if anything I've said is wrong of if you can answer the question more precisely and/or concisely.

Thanks
« Last Edit: May 17, 2019, 08:01:16 am by Seamus Wong »

NomotivationF

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Re: Causes of Australia's NFD
« Reply #1 on: May 17, 2019, 06:04:58 pm »
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Can someone give me their explanation of one factor that contributes to Australia's Net Foreign Debt?

Here is what I've written, I just wanna know how other people would answer the same question...

The savings-investment gap is one the leading factors contributing to Australia's NFD. The lack of domestic savings relative to high levels of investment by Australian households firms and the government has lead to shortages in the availability of credit, causing demand-pull inflation and pushing up the cost of credit - i.e. causing Australian Interest rates to rise to relatively high levels. This therefore leads to a dependance on foreign debt through the issuing of bonds or acquiring loans to finance our investments, increasing financial account credits and thus contributing to Australia's NFD. Furthermore, the fact that interest rates abroad are relatively cheaper increases the attractiveness of foreign debt, further adding to financial account credits and thus Australia's NFD.

Please let me know if anything I've said is wrong of if you can answer the question more precisely and/or concisely.

Thanks

This seems relatively the same to what I have 👍👍👍👍
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Seamus Wong

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Re: Causes of Australia's NFD
« Reply #2 on: May 17, 2019, 11:04:05 pm »
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This seems relatively the same to what I have 👍👍👍👍

Okay, good. My teacher has told me that it is fine. The only questionable part in my response is the mention of Demand-inflation. It's not wrong but it's not necessary apparently.

NomotivationF

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Re: Causes of Australia's NFD
« Reply #3 on: May 17, 2019, 11:24:39 pm »
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Okay, good. My teacher has told me that it is fine. The only questionable part in my response is the mention of Demand-inflation. It's not wrong but it's not necessary apparently.

Yeah I don't that in my notes either so i don't think it's necessary at all
Offering tutoring for Economics, Further Maths and Psychology
(Email [email protected])
(Mobile - 0435076426)

My journey through VCE

How I got a Raw 48 in Economics


2018 - Accounting [42] Further Maths [44]
2019 - English [39] Economics [48] Psychology [44] Maths methods [33]
ATAR - 97.5
2020-2023 - Ba Commerce/Science @Monash