Ironically, we refer to Craig James today on Australia’s net foreign debt which is growing exponentially as both public and private balance sheets leverage into the mining bust:
Our high level of foreign debt represents a risk – if export income was to dry up it would constitute a problem. But exports continue to rise, resulting in our debt servicing ratio improving to the best levels in almost 30 years.
Of further comfort in the current environment is the fact that the current account deficit improved markedly in the past quarter. And while the terms of trade fell, increased volumes of exports are offsetting lower prices – the value of exports of goods rose by almost 2 per cent in the latest quarter.
That marvelous period post-2008 when for a moment Australia embraced sense and disleveraging ruled the land is now an hilarious footnote in Australia’s righteous debt apotheosis.
I am not, of course, comforted, by the servicing costs which will rise at some point, probably rather suddenly.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
