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hello banana republic « Previous | |Next »
January 11, 2006

So Australia's current account deficit in November was worse than expected--something of a shocker. The deficit rose from 5.8 per cent of gross domestic product to 6.4 per cent --- we are now above the "banana republic" level of 6.2 per cent. Rising interest and dividend payments to foreigners may well push the current account deficit above 7 per cent by the middle of the year.

Even the economists are starting to worry. So they should, as imports rose by 11% whilst exports rose by 1%. Exports have not really been growing for quite sometime----the last 4 years or so.

Does that blow-out make a dent in the eternal optimism of things getting better? Nay. A mere blip on the radar screen, says the Trade Minister.

You see we have become so rich from exports and years of solid economic growth that we can afford to buy ever more imports ---cars, laptops mobile phones, ipods. So it's a good result really. It shows how wealthy we have become, due to the great economic governance of Treasury.

And the small matter of the CAD deficit? Is that a flaw in governance?

No worries. Soon the mining production will eventually increase. It's just taking time to build capacity, that's all. Eventually the capacity constraints will ease, the mining investment boom will deliver more exports, and we will be able to buy the desired high tech home entertainment systems that are appearing in the glossy trade shows.

Then again it is the silly season, isn't it.

| Posted by Gary Sauer-Thompson at 8:14 AM | | Comments (0)
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