*a negative figure implies a surplus.
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Why we have Foreign Debt.
Australia's economy will continue to include some level of foreign debt. There are several reasons for this, the size of our capital market will always be a problem, in Australia there is more domestic investment is greater that domestic savings, Australians tend to spend more that they save. Australia has an extremely low savings level, only 3.7% per household. Another reason is that the government borrows funds to finance a budget deficit and capital expenditure, when borrowing money, the exchange rate alters the level of our debt. The main reason we have foreign debt is because we have a Current Account Deficit (CAD), every month we have a CAD out debt increases by approximately 1.5 billion dollars, our imports are greater than our exports. We are living beyond our means and spending money we don't have. Foreign ownership is also a cause of foreign debt, money made in Australia is sent overseas instead of being invested back into the Australian market.
COSTS AND BENEFITS.
As with everything, there are costs and benefits associated with foreign debt. These positive and negative effects of foreign debt are the basis for all decisions made concerning foreign debt, economists look at all possible outcomes and measure the value of risk associated with our debt at any one time, depending on overseas markets and the global economy, Australia's debt has changing effects on our economy. This is also important for political choices, if our foreign debt is costing the economy then the government will not increase and will try to decrease it, they will also try to use this as a political tool to win the votes of voters, pleasing then by promising a positive outlook on the economy by reducing debt or increasing their standard of living.
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The costs affect Australia's economy in a negative fashion and increase the size of our debt, these costs include.