Flashcards in Foreign Investment Deck (45)
Foreign investment into Australia
Australian investment abroad
Why does Australia rely on net inflows of foreign investment?
Develop economy, supplement domestic savings for high investment rate
Why does Australia record a CAD and FAS?
Total investment exceeds savings, import foreign savings
Something you owe
Something you own
Anyone except the government
Cumulative, e.g. Debt
Shows a change over a year, e.g. GDP
How is debt measured?
Proportion of wealth/assets, not GDP
How do foreign entities prefer to raise capital?
Borrow, not sell assets
Why is debt not a problem?
Short time period (33% repaid in the year, 70% in 5)
Increased real income
How are liabilities removed?
How much Australian assets are owned by foreign entities
Gross - Australian lending
In which BoP account are investment income recorded in?
Why are liabilities not a problem?
Fund our high levels of investment
How are net foreign liabilities measured and why?
% of total financing in the economy, not GDP
Gives idea how funding comes from overseas
What are the branches of foreign investment?
Liabilities and assets
What are the components of liabilities?
Debt and equity
Borrowing to help develop the economy
Borrowing to pay off other debt
What happened to FI over the past decade?
Increased debt, decreased equity
50% to 64% of GDP (2006-16)
Why have servicing costs fallen over time?
Decreased world interest rates
Improved Aussie export performance
Examples of assets
Buildings, machinery, equipment, land, mineral resources
Trends since 2000
Liabilities increased $2tn
Assets increased $5.3tn
Wealth increased $3.3tn
Wealth per capita increased
Potential credit rating downgrade
Higher interest rate decreases SoL
ToT deterioration reduces exports income
AUD depreciation increases foreign currency denominated debt
Slow trade partner economy reduces export income