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Australia’s current account deficit in a global imbalances context


  • Phil Garton

    (Treasury, Government of Australia)

  • Matt Sedgwick

    (Treasury, Government of Australia)

  • Siddharth Shirodkar

    (Treasury, Government of Australia)


This article looks at Australia’s current account deficits in light of concerns about the role of external imbalances in the global financial crisis and the difficulties now facing a number of countries that have run large current account deficits in recent years. Australia is clearly differentiated from other deficit countries in that recent high deficits have been driven by rises in non-housing investment — mainly in response to high resource prices — while national saving has been increasing. This suggests that our deficits are less likely to reflect underlying imbalances in the economy.It is plausible that Australia could maintain large inflows of foreign capital for some time, given resource demands from China and India. This would imply a further rise in our net foreign liabilities as a share of GDP. However, the trade balance adjustment that will be needed eventually to stabilise this share does not appear onerous, particularly as investment in the resources sector will boost future export supply.

Suggested Citation

  • Phil Garton & Matt Sedgwick & Siddharth Shirodkar, 2010. "Australia’s current account deficit in a global imbalances context," Economic Roundup, The Treasury, Australian Government, issue 1, pages 29-50, April.
  • Handle: RePEc:tsy:journl:journl_tsy_er_2010_1_1

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    References listed on IDEAS

    1. Maurice Obstfeld & Kenneth Rogoff, 2007. "The Unsustainable U.S. Current Account Position Revisited," NBER Chapters,in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 339-376 National Bureau of Economic Research, Inc.
    2. Michael A. Kouparitsas, 2005. "Is the U.S. current account sustainable?," Chicago Fed Letter, Federal Reserve Bank of Chicago, issue Jun.
    3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The intertemporal approach to the current account," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 34, pages 1731-1799 Elsevier.
    4. David Gruen & Amanda Sayegh, 2005. "The Evolution of Fiscal Policy in Australia," Oxford Review of Economic Policy, Oxford University Press, vol. 21(4), pages 618-635, Winter.
    5. Cashin, Paul & McDermott, C John, 2002. "Intertemporal Consumption Smoothing and Capital Mobility: Evidence from Australia," Australian Economic Papers, Wiley Blackwell, vol. 41(1), pages 82-98, March.
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    More about this item


    current account; foreign direct investment; debt sustainability;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements


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