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June 20, 2024, 07:12:59 am

Author Topic: Balance of payments  (Read 997 times)  Share 

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pd_123

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Balance of payments
« on: November 11, 2019, 04:59:47 pm »
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Can you please explain the relationship between th current account and the capital and financial account.

IThinkIFailed

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Re: Balance of payments
« Reply #1 on: November 12, 2019, 07:17:50 am »
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Essentially, when we have a current account deficit, it means our spending has exceeded our income, obviously, this excess spending technically cannot occur, without being financed by loans, or even sale of equity in Australian businesses. These loans and sales of equity in Australian businesses count as credits in the capital and financial account. Thatís why, whenever our spending exceeds income, itís always met by an equal amount of credits in the capital and financial account, because itís effectively being financed by those credits of loans  from foreigners and equity payments (donít know if equity payments is an actual term, but it sounds cool :P)
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