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Foreign debt in Australia

             Foreign debt is a subset of the financial obligations that compromise a countries international investment position. It includes all the non-equity components of the net international investment positions, all recorded assets + liabilities other than equity securities + direct investment equity capital including reinvested earnings. Put simply it is the international debt owed by a nation to the rest of the world.
             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 any of it back. The federal government will also borrow if there are insufficient funds in Australia's savings account, if there is a large depreciation in the value of the Australian dollar, if the Australian interest rates are significantly higher than potential lenders.
             There are also different avenues of incentive to borrow from other countries than to wait for the funds to be generated by taxes and saving. The borrowed money can be invested into the economic development of any industry which gives a massive boost to the economic condition of that industry. The borrowed money can be used to start new enterprises or investment avenues that can generate further funds. The borrowing of money from other countries can lead to better trade conditions due to enhanced trade relations, all of these will eventually end up with an increased Standard of Living for the general population, by increasing demand and stimulating production improvements.

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