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March 01, 2006
The Australian Bureau of Statistics has said that the current account deficit widened six per cent to $14.5 billion in the December quarter, the third highest on record . The current account deficit has measured over 6 per cent of GDP for five consecutive quarters, the longest run on record. That is in spite of a booming mining exports (in iron ore and coal) and the terms of trade running in Australia's favor.
Nobody in the Howard Government seems worried. It is assumed that the earnings from booming commodity exports, along with improving rural production would drive down the current deficit. Quarry Australia is doing okay. All we have to do is sit and wait for the market to work its magic and the current account deficit will come down.
I reckon that the current account deficit will remain large for most of this year. Isn't it a good issue to raise? So where is the ALP on all of this?
Why aren't they raising concerns about the steady rise in global interest rates increasing the repayments on the debt? Or the failure of the export sector to contribute to economic growth? How come this is not a central plank in their critique of the Governemnt's economic management?
Are they raising the issues but they don't cut through the media filters? Or has Wayne Swan, the Opposition's Treasury spokesperson, given up?
He's raising the issues. But it is just a doorstop. There is a media release Shouldn't Swan be all over the airwaves on this? Stephen Smith is raising the issue of the decline in manufacturing, but it is not cutting through.
So what are they doing about that? Or is the strategy to concentrate the attack on the Howard Government inside Parliament in Question Time? That is what it looks like to me.
Update: 3 March
Some interesting figures.
Australia has a trade deficit with China--- now $4 billion for the first seven months of the financial year. For the same period of last financial year it was $5.3 billion.The deficit with the United States (currently $7.7 billion), Thailand (currently $800 million) and Singapore (currently $3.1 billion) have all blown-out this year.The exception to this is the trade surplus with Japan has increased and now stands just short of $8 billion for the first seven months of the year. That was the total size of the surplus in 2004/05.
All in all Australia's trade deficit with the rest of the world blew out by 135 per cent to $2.69 billion in January with exports slumping seven per cent during the month to $15.2 billion. January's record trade deficit should be worrying the government, Treasury and the Reserve Bank – but all the signs are that this indicator of an uncompetitive economy is being treated by all these powers with indifference.
Isn't Treasury running out of excuses on the trade deficit. Export volumes have been predicted to rise for years now – eg by Treasury in successive budget estimates--- but there has in fact been little overall increase. In some sectors such as manufacturing, exports have fallen. Isn't the situationmasked by the substantial rises in the prices of mineral exports. So what happens when resource prices stop rising and begin to fall?
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Exactly the conclusion I came up with yesterday too (as i was thinking about it).
If our CAD is increasing and its mostly private and interest rates outside of oz go up we're in dire trouble.