As at March 2002, Australia’s net foreign debt was AUS $332 billion owed mainly to countries more developed than itself, for example the United States and Japan. Australia borrows money from other countries to cover any deficit in the Current Account. Australia’s foreign debt is increasing every year because the negative balance on the current account is increasing, (more in debt to itself) Australia is borrowing to cover this and is therefore unable to pay an

There is only one way to reduce the amount of foreign debt that Australia owes and that is to pay it back. Some solutions that can help the Australian Federal Government to reduce the debt is to increase the incentive for domestic savings so there is less need to borrow from overseas, increase the amount of income from avenues such as exports so the debt can be paid off faster- this can be done by increasing the competitiveness of Australian exports, try to appreciate the value of the Australian dollar which effectively reduces the amount owed to the lender, making it more attractive for foreign countries to invest equities into Australia- this can be done by reducing the barriers of foreign investment. The general public needs to be made more aware of what foreign debt is and how it affects them. Now is as good a time as any to start, the public need to know that interest rates are rising and the Standard of Living is

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