Unit3 AoS3 DP4 - Net Foreign Debt

Question 1

Net Foreign Debt

Answer 1

The difference in value between what Australia has borrowed and owes overseas MINUS what Australia has loaned or invested abroad.

NFD = Australia’s Liabilities – Australia’s Assets

Question 2

Net Foreign Equity

Answer 2

The excess value of foreign owned Australian assets over overseas assets owned by Australians (e.g. property, shares, etc…)

NFE = Value of foreign-owned Australian Assets – Value of Australian owned foreign assets

Question 3

Causes of NFD

Answer 3

• Low domestic savings
• Many budget deficits
• High foreign investment
• Stable economy/government
• Low AUD
• Deregulation and globalisation

Question 4

Effects of NFD
Benefits

Answer 4

• Finance for future expansion
• Access to cheaper credit

Question 5

Effects of NFD
Costs

Answer 5

• Creation of economic hardship
• Burden of debt repayment
• Adds to the CAD