Footnotes
[1] The
Treasury, Submission 13, p. 6.
[2] The Treasury, Submission 13, p. 6.
[3] The ABS defines the balance on current account as
the sum of the balances on goods trade, services trade, income and current
transfers. Measuring Australia's Economy,
ABS cat. 1360.0. See also Footnote 6.
[4] This description of Australia's current account is
largely based on the submission from the Department of the Treasury (Submission
13). The Treasury was helpful in
providing the Committee with updated versions of the graphs contained in its
submission so that this report could reflect the latest available figures.
[5] The Treasury submission states that since European
settlement Australia has had current account deficits in 9 out of every 10
years (Submission 13, p. 1), but Australia has had only 4 current account
surpluses since 1950, the most recent in 1972-3.
[6] Unless otherwise stated, values in this report are
expressed in A$ billions. $1 billion =
1000 x $1 million. The figures have
generally been rounded to one decimal place.
[7] The Treasury, Submission
13, p.4.
[8] The
trade balance is the difference between the total credit (export) value and the
total debit (import) value of goods and services. The net income balance is the
difference between the value of income (such as interest and dividends) earned
by residents from non-residents (credits) and income earned by non-residents
from residents (debits). Net current
transfers are the difference between current transfer credits and debits (for
example, Australian foreign aid is a debit, while pensions paid to Australian
residents by foreign governments is a credit).
These definitions are from Measuring
Australia's Economy, ABS cat. 1360.0.
[9] The Treasury,
Submission 13, p. 2.
[10] The Treasury,
Submission 13, p. 2.
[11] 'Net foreign liabilities' is defined as
Australia's gross foreign liabilities less gross foreign assets. This is also referred to as the 'Net
international investment position'. RBA Bulletin, Notes to Table H5.
[12] Current transfers are not included in this
table. Net current transfers totalled
-$420m in 2004 - 05. ABS, Balance of Payments (Catalogue 5302.0,
June quarter 2005).
[13] 'Other net income payments' includes all
non-interest income items such as dividends, reinvested earnings, and charges
on accounts payable and receivable. RBA
Bulletin, Notes to Table H7.
[14] The Treasury, Submission
13, p. 4.
[15] The Treasury, Submission
13, p. 6.
[16] See Figure 2 in Chapter 3 for details.
[17] OECD, Economic
Outlook, No. 77, June 2005.
[18] Dr David Gruen, Department of the Treasury, Proof Committee Hansard, 15 August
2005, p. E2.
[19] See also the discussion on the saving/investment
perspective of the current account in paras 2.21 to 2.26 in Chapter 2.
[20] Proof
Committee Hansard, 15 August 2005, p. E4.
[21] Proof
Committee Hansard, 15 August 2005, p. E8.
[22] Official
Committee Hansard, 16 May 2005, p. E13.
[23] Proof
Committee Hansard, 15 August 2005, p. E6.
[24] Proof
Committee Hansard, 15 August 2005, p. E6.
[25] See Table 1 and Figures 1 & 2 in Chapter 2.
[26] The OECD countries which appear to have CADs of
roughly this magnitude are Iceland, Hungary, Greece, the Czech Republic and New
Zealand, with the USA not far behind.
OECD Economic Outlook, No. 77
June 2005, Annex Table 51.
[27] Official
Committee Hansard, 16 May 2005, p. E13. Mr Conroy's comments on the impact
of the terms of trade are based on an article in the Australian Financial
Review on 6 December 2004, Beware the
terms-of-trade elephant by Mr Barry Hughes, who is described as an economic
consultant to Credit Suisse and other groups.
[28] Proof
Committee Hansard, 15 August 2005, p. E3.
[29] Proof
Committee Hansard, 15 August 2005, p. E8.
The ABS report referred to is expected to be published during October
2005.
[30] Proof
Committee Hansard, 15 August 2005, p. E14.
[31] Proof
Committee Hansard, 15 August 2005, p. E34.
[32] Between the September 2000 quarter and the March
2005 quarter gross foreign liabilities (other than direct investment
liabilities) of financial corporations increased 60%, from $303 billion to $487
billion. As at the March 2005 quarter depository corporations represented 72%
of the total. ABS Balance of Payments and International Investment Position, cat.
5302.0.
[33] RBA, Financial
System Stability: some current observations, address by John F Laker,
Assistant Governor (Financial System), 16 May 2003, p. 4.
[34] Table B03 Banks
– liabilities in the RBA Bulletin indicates that as at 30 June 2005, the banks had
overseas liabilities of $275 billion, an increase of $29 billion over the
previous financial year.
[35] The 2004-05 figures on household consumption and
business investment are from the July 2005 publication of ABS National Income, Expenditure and Product,
Cat. 5206.0.
[36] Also referred to in ABS publications as the 'net
international investment position'. The
term 'net foreign investment' is also sometimes used. This report generally
uses the term 'net foreign liabilities'.
[37] RBA Bulletin, Table H6. On 24 September 2005 the
Australian Financial Review reported that the Commonwealth Government recorded
an underlying cash surplus of $13.6 billion in 2004-05. Budget surplus swells by $4.4 bn, AFR, 24 September 2005, p. 5.
[38] RBA Bulletin, Table H4. The proportion of gross borrowings in
Australian dollars fluctuates but has always been below half of the total. The
highest proportion - 45.3% - was recorded at 30 June 1997.
[39] US dollar loans usually represent between half
and two-thirds of total foreign currency loans.
[40] Proof
Committee Hansard, 15 August 2005, p. E33.
[41] Proof Committee Hansard, 15 August 2005,
p. E4. The term ‘consenting-adults
deficit’ describes a deficit which is made up of largely private sector debt
and the foreign lenders who are providing the money seem to be quite willing to
lend as much as is required.
[42] Proof
Committee Hansard, 15 August 2005, p. E34.
[43] Proof
Committee Hansard, 15 August 2005, p. E35.
[44] Proof
Committee Hansard, 15 August 2005, p. E34.
[45] Proof
Committee Hansard, 15 August 2005, p. E35.
[46] Appendix 3 has an explanation of the relationship
between the CAD and net foreign liabilities.
[47] Proof
Committee Hansard, 15 August 2005, p. E2.
[48] Net income payments comprise net interest
payments plus net payments of dividends and reinvested earnings.
[49] Proof
Committee Hansard, 15 August 2005, p. E4.
[50] Proof
Committee Hansard, 15 August 2005, p. E31.
[51] Proof
Committee Hansard, 15 August 2005, p. E32.
[52] Official Committee
Hansard, 16 May 2005, p. E13.
[53] See discussion in paras 3.21 to 3.23.
[54] See Figures 4 and 5 in Chapter 2 for details of
Australia's imports and exports of goods and services 1971 – 2005.
[55] The Treasury, Submission
13, p. 4. The ABS
announced the national accounts figures on 7 September 2005. In seasonally adjusted terms, GDP increased by 1.3% in the June
quarter. Very strong growth in the terms of trade (up 5.8%for the June quarter
and 11.5% for 2004-05) is reflected in strong growth in real net national
disposable income of 3.1% in the June quarter with a total of 4.3% for
2004-05. ABS Cat. 5206.0
[56] Submission
13, p. 3.
[57] Submission
13, p. 3.
[58] Proof
Committee Hansard, 15 August 2005, p. E5.
[59] Proof
Committee Hansard, 15 August 2005, p. E16.
[60] Proof
Committee Hansard, 15 August 2005, p. E17.
[61] Proof
Committee Hansard, 15 August 2005, p. E17.
[62] Official
Committee Hansard, 16 May 2005, p. E17.
[63] Austrade is part of the DFAT portfolio. It has a wide network of over 100 offices in
50 countries, which is a major commitment of resources by the Government. Other
Government agencies involved include the Department of Foreign Affairs and
Trade in relation to trade policy; and the Department of Industry, Tourism and
Resources in relation to industry policy.
[64] Official
Committee Hansard, 16 May 2005, p. E15.
[65] See
discussion in paras 2.21 to 2.26 in Chapter 2.
[66] 'Why have Australia's imports of goods increased
so much?', Treasury Economic Roundup,
Summer 2004-05.
[67] 'Why have Australia's imports of goods increased
so much?', Treasury Economic Roundup,
Summer 2004-05, p. 43.
[68] The Treasury, Submission
13, p. 2.
[69] Proof
Committee Hansard, 15 August 2005, p. E2.
[70] Proof
Committee Hansard, 15 August 2005, p. E2.
[71] Proof
Committee Hansard, 15 August 2005, p. E5.
[72] Proof
Committee Hansard, 15 August 2005, p. E31.
[73] Proof
Committee Hansard, 15 August 2005, p. E33.
[74] Proof
Committee Hansard, 15 August 2005, p. E33.
[75] Official
Committee Hansard, 16 May 2005, p. E13.
[76] Official
Committee Hansard, 16 May 2005, p. E13.
[77] Proof
Committee Hansard, 15 August 2005, p. E4.
The Reserve Bank of Australia also sounds a cautionary note: '... the
pre-conditions are in place for quite abrupt swings in sentiment and a
disruptive snap-back in pricing.' RBA, Financial
Stability Review, September 2005, p. 2.
[78] Proof
Committee Hansard, 15 August 2005, p. E14.
[79] Proof
Committee Hansard, 15 August 2005, p. E10.
[80] APRA – Australian Prudential Regulation
Authority, which is part of the Treasury portfolio.
[81] Proof Committee
Hansard, 15 August 2005, p. E10.
[82] Proof
Committee Hansard, 15 August 2005, p. E8.
[83] Proof
Committee Hansard, 15 August 2005, p. E13.
[84] Official
Committee Hansard, 16 May 2005, p. E14.
[85] Proof
Committee Hansard, 15 August 2005, p. E10.
[86] Proof
Committee Hansard, 15 August 2005, p. E9.
[87] Proof
Committee Hansard, 15 August 2005, p. E4.
[88] Proof
Committee Hansard, 15 August 2005, p. E6.
[89] Proof
Committee Hansard, 15 August 2005, p. E15.
[90] Proof
Committee Hansard, 15 August 2005, p. E27.
[91] Proof
Committee Hansard, 15 August 2005, p. E27.
[92] Proof
Committee Hansard, 15 August 2005, p. 17.
[93] 'Traffic lights on the blink?', The Economist, 20 August 2005, p. 49.
[94] CL Freund, 'Current account adjustment in
industrialised countries', International
Finance Discussion Papers, No. 692, Federal Reserve System, December 2000,
pp. 17-18.
[95] Budget and
trade deficits: linked, both worrisome in the long run, but not twins,
Speech by E M Gramlich, Governor Federal Reserve Board, 14 May 2004.
[96] IMF World Economic Outlook, September 2005. Some economists have estimated that it would
take a real depreciation of 30% in the US$ to eliminate the USA's current
account deficit, WEO, Chapter 1, p. 72.
[97] What are
the global imbalances? Speech by Mr Macfarlane to the Economic Society of
Australia on 28 September 2005.
[98] Proof
Committee Hansard, 15 August 2005, p. E26.
[99] Proof
Committee Hansard, 15 August 2005, p. E26.
[100] Proof
Committee Hansard, 15 August 2005, p. E26.
[101] Proof
Committee Hansard, 15 August 2005, p. E31.
[102] Proof
Committee Hansard, 15 August 2005, p. E28.
[103] Proof
Committee Hansard, 15 August 2005, p. E29.
[104] Proof
Committee Hansard, 15 August 2005, p. E28.
[105] Official
Committee Hansard, 16 May 2005, p. E14.
[106] Treasury website www.treasury.gov.au accessed on 12
September 2005. Treasury's submission to
this Inquiry appeared in the June 2005 edition of Economic Roundup. The
article in the May 2001 edition of Economic
Roundup was titled 'The net income deficit over the past two decades'.
[107] For example, Treasury presented a paper to the
ABE Forecasting Conference on 14 December 2004 titled 'Australia's medium-term
challenges'. Key challenges for
Australia identified in the paper include labour productivity, household debt,
and exports. The paper also contained a discussion of the USA's current account
deficit - but curiously not our own.
[108] RBA, Do
Australian households borrow too much?, p. 7.
[109] RBA, Bank
lending by sector, Table D05
http://www.rba.gov.au/Statistics/Bulletin/D05hist.xls
[110] 'Living in never-never land', The Economist, 9 January 2003.
[111] Derived from Reserve Bank of Australia, Credit and Charge Card Statistics, Table
C1, http://www.rba.gov.au/Statistics/AlphaListing/alpha_listing_c.html
[112] ANZ, Submission
17, p. 7.
[113] This table shows bank lending only and does not
include lending by non-bank lending institutions.
[114] The Treasury, Submission 13, p. 7.
[115] Income,
wealth and joblessness: insights from the HILDA survey, a paper by B.
Headey and M Wooden of the University of Melbourne, presented to the 2005
Melbourne Institute Economic and Social Outlook Conference, 31 March – 1 April
2005.
[116] RBA Economic Group, Housing Leverage in Australia, Luci Ellis, Jeremy Lawson and Laura
Roberts-Thomson, July 2003.
[117] RBA Economic Group, Housing Leverage in Australia, Luci Ellis, Jeremy Lawson and Laura
Roberts-Thomson, July 2003, p. 8.
[118] The Treasury, Submission 13, p. 7.
[119] ANZ, Submission
17, p. 3.
[120] ANZ, Submission
17, p. 4.
[121] RBA, Do
Australian households borrow too much?, speech by Mr I J Macfarlane,
Governor, to the Sydney Institute, 3 April 2003, p. 5.
[122] RBA Economic Group, Housing Leverage in Australia, Luci Ellis, Jeremy Lawson and Laura
Roberts-Thomson, July 2003, p. 8.
[123] RBA,
Financial Stability Review, p. 11.
[124] CFCS, Submission 2, p. 3.
[125] Official
Committee Hansard, 16 May 2005, p. E22-23.
[126] Official
Committee Hansard, 16 May 2005, p. E73.
[127] FCAN, Submission 1, iii.
[128] CFCS, Submission 2, p. 2.
[129] CCLC (NSW) Inc, Submission 6, p. 3.
[130] Official
Committee Hansard, 16 May 2005, p. E21.
[131] Anglicare Tasmania Inc, Submission 10.
[132] CCCL Griffith University, Submission 11, p. 3
[133] CCCL Griffith University, Submission 11, p.
3.
[134] CCCL Griffith University, Submission 11, p.
4.
[135] CCCL Griffith University, Submission 11, p.
4.
[136] FCAN, Submission 1, attachment, p. 48.
[137] Official
Committee Hansard, 16 May 2005, p.55. (Mr Naffah)
[138] Official
Committee Hansard, 16 May 2005, p. E21-22.
[139] RBA, Do Australian
households borrow too much?, p. 7.
[140] MasterCard, Submission
15, p. 3.
[141] RBA, Financial Stability Review, September 2005, p. 16.
[142] RBA, Opening Statement to the House of
Representatives Standing Committee on Economics, Finance and Public
Administration, 6 June 2003, p. 3. (from RBA website)
[143] Financial
Stability Review, September 2005, p. 2.
[144] Financial
Stability Review, September 2005, p. 8.
[145] The Treasury, Submission 13, p. 10.
[146] RBA, Do Australian
households borrow too much?, p. 3.
[147] House of Representatives Standing Committee on
Economics, Finance and Public Administration, Official Hansard, 12 August 2005, p. 34.
[148] Financial
Stability Review, September 2005, p. 11.
[149] CCLC Griffith University, Submission 11, p.
3.
[150] See for example RBA, Do Australian households borrow too much?, pp. 3-4.
[151] House of Representatives Standing Committee on
Economics, Finance and Public Administration, Official Hansard, 4 June 2004, p. 15.
[152] RBA, Financial
System Stability – some current observations, speech by John F. Laker,
Assistant Governor (Financial System), 16 May 2003, p. 13.
[153] Productivity Commission Inquiry Report, First Home Ownership, No. 28, 31 March
2004, pXXV.
[154] AMWU, Submission
4, p. 4.
[155] Governor of the RBA, Mr I Macfarlane, in House
of Representatives Standing Committee on Economics, Finance and Public
Administration, Official Hansard, 12
August 2005, p. 8.
[156] House of Representatives Standing Committee on Economics,
Finance and Public Administration, Official
Hansard, 4 June 2004, p. 16. Quoted from the Committee's report, Review of the Reserve Bank of Australia
Annual Report 2003, p. 18.
[157] APRA, Submission
3, p. 3.
[158] Governor of the RBA, Mr I Macfarlane, in House
of Representatives Standing Committee on Economics, Finance and Public
Administration, Official Hansard, 12
August 2005, p. 8.
[159] RBA, Monetary
Policy and Financial Stability, speech by the Governor, Mr I. J.
Macfarlane, 16 November 2004.
[160] Centre for Consumer Law, Griffith University, Submission 3, p. 4-5.
[161] Official Committee Hansard, 16 May 2005,
p.E22.
[162] APRA, Report
on Broker Originated Lending, January 2003, p. 9.
[163] Discussion paper, National Finance Broking Regulation - Regulatory impact statement,
published on line by the Office of Fair Trading, Government of NSW, p. 8.
[164] Official
Committee Hansard, 16 May 2005, p.E30.
[165] Official Committee Hansard, 16 May 2005,
p.E26.
[166] Official
Committee Hansard, 16 May 2005, p.E30.
[167] Official Committee Hansard, 16 May 2005,
p.E27.
[168] APRA, Submission
3 – see pp 3-6.
[169] See ANZ, Submission
17, pp. 11-12.
[170] Described in the Government Response to the
House of Representatives Standing Committee on Economics, Finance and Public
Administration Committee's report: Review
of the Reserve Bank of Australia Annual Report 2003.
[171] Described in APRA, Submission 3.
[172] Derived from RBA, Credit and Charge Card Statistics, Table C1,
http://www.rba.gov.au/Statistics/AlphaListing/alpha_listing_c.html
[173] Official
Committee Hansard, 16 May 2005, p. E22.
[174] CCLC, Submission
6, p. 9.
[175] FCAN, Submission
1, p. 1.
[176] BFSO, Submission
12, p. 6.
[177] Anglicare Tasmania, Submission 10, p. 2.
[178] Official
Committee Hansard, 16 May 2005, p. E69.
[179] Official
Committee Hansard, 16 May 2005, p. E72-3.
[180] Official
Committee Hansard, 16 May 2005, p. E1-2.
[181] Official
Committee Hansard, 16 May 2005, p. E4.
[182] Virgin Money, Submission 7, pp. 2, 9.
[183] FCAN, Submission
1, p. 2.
[184] Official
Committee Hansard, 16 May 2005, p. E71.
[185] FCAN, Submission
1, p 2.
[186] CCLC, Submission
6, p. 14.
[187] Submission
6, p. 13.
[188] Care Financial Counselling Service, Submission 2, p. 4.
[189] CCLC, Submission
6, p. 10.
[190] Dun & Bradstreet (Australia) Pty Ltd, Submission 14, and MasterCard
International, Submission 15.
[191] Common
credit providers are banks, building societies and credit unions. However
credit providers also include:
- businesses that
issue store credit cards, eg department stores;
and
- businesses that
provide a good or service and allow payment to be deferred, for example,
telephone, gas and electricity companies, video hire shops, furniture stores
and car hire businesses.
[192] Office of the Federal Privacy Commissioner, Privacy Act: Fact sheet 7, viewed on
21 September 2005, at:
http://www.privacy.gov.au/publications/crda.html#3.
[193] MasterCard, Submission
15.
[194] Submission
15.
[195] Dun and Bradstreet, Submission 14, p. 6.
[196] Submission
14, p. 6.
[197] Submission
14, p. 7.
[198] Submission
14, pp 9–11.
[199] Dun and Bradstreet, Submission 14, p. 8.
[200] However, Anglicare Financial Counselling
Service, Tasmania (Submission 10, p.
3) advocated that, along with restrictions on credit practices and other
measures, a review of the merits of positive credit reporting should be
undertaken.
[201] Australian Consumers' Association, Credit reporting: mistaken identity and
other stories, viewed on 23 February 2005,
at: http://www.choice.com.au/printFriendly.aspx?ID=104159; Catherine
Wolthuizen, 'Open sesame', Consuming
Interest, Spring 2004, pp 15-17; Letter to the editor, Australian Financial
Review, Self-interest gags credit
reporting, Catherine Wolthuizen, Australian Consumers Association, 18
February 2005, p. 79.
[202] Nicola Howell, Consumers' Federation of
Australia, Expanding the credit reporting
system – A summary of consumer concerns, July 2003.
[203] Legal and Constitutional References Committee, The real Big Brother: Inquiry into the
Privacy Act 1988, June 2005.
[204] The real
Big Brother: Inquiry into the Privacy Act 1988, p. 160.
[205] The real
Big Brother: Inquiry into the Privacy Act 1988, pp 159-160.
[206] Appendix 3 is largely based on Research Note
No. 40 of 29 April 1996, titled Relationship
between the current account deficit and foreign debt published by the
Department of the Parliamentary Library.
The figures in the original Research Note have been updated from ABS Balance of Payments and International
Investment Position, Cat. 5302.0.
[207] Prof Garnaut, Proof Committee Hansard, 15 August 2005, p. E37.
[208] Dr Gruen, Proof
Committee Hansard, 15 August 2005, p. E37.
[209] Mr Hawkins, Proof
Committee Hansard, 15 August 2005, p. E38.
[210] Mr Pearson, Proof
Committee Hansard, 15 August 2005, p. E38.
[211] Mr Potter, Proof
Committee Hansard, 15 August 2005, p. E36.
[212] Dr Simes, Proof
Committee Hansard, 15 August 2005, p. E37.
[213] The Treasury,
Submission 13, p. 7.
[214] ANZ Bank, Submission 17, p. 1.
[215] RBA, Do
Australian Households borrow too much?, Speech by the Governor, Mr I.J.
Macfarlane to the Sydney Institute, 3 April 2003.
[216] RBA, Financial
Stability Review, September 2005, p. 20.
[217] RBA, Do
Australian Households borrow too much?, 3 April 2003.
[218] Productivity Commission Inquiry Report, First Home Ownership, No. 28, 31 March
2004, Key findings.
[219] The Treasury, Submission 13, p.
10.
[220] RBA, Statement
on Monetary Policy, 8 August 2005, pp. 28, 36.
[221] ABA,
Submission 16, p. 3.
[222] The Treasury,
Submission 13, p. 11.
[223] Submission
13, p. 11.
[224] ABA,
Submission 16, p. 7. It
should be noted that securitisation is not used exclusively by non-conforming
lenders. Securitisation is also used extensively by more traditional lenders. 17 per cent of all housing
loans are now securitised, a modest figure compared to the USA where the figure
is in excess of 60 per cent.
[225] Submission
16, p. 9.
[226] Official
Committee Hansard, 16 May 2005, p. E68.
[227] The Treasury, Submission 13, p.
7.
[228] Derived from RBA data and statistics provided by
Parliamentary Library.
[229] ABA, Submission 16, p. 4.
[230] Productivity Commission
Inquiry Report, First Home Ownership,
p. 44.
[231] Productivity Commission Inquiry Report, First Home Ownership, p. XVII.
[232] RBA, Do
Australian Households borrow too much?, Speech by the Governor, Mr I.J. Macfarlane,
to the Sydney Institute, 3 April 2003.
[233] Productivity Commission Inquiry Report, First Home Ownership, pp. 22 &
33. According to the Australian Taxation
Office's Taxation Statistics in
2001-02 there were 10 280 299 taxpayers of whom 1 337 520 (13 per cent) received
rental income. The RBA reports that borrowing for property investment grew at
an average of 21.6 per cent in the period 1993-2003, compared to 13.4 per cent
for owner occupied housing; RBA, Do
Australian households borrow too much?, p. 4
[234] Productivity Commission Inquiry Report, First Home Ownership, pp. XVIII.
[235] ANZ, Submission 17, p. 1.
[236] Productivity Commission Inquiry Report, First Home Ownership, p. 60.
[237] Productivity Commission Inquiry Report, First Home Ownership, p. 61.
[238] ANZ Economic Research, Household consumption and the wealth effect, June 2004. This
section draws heavily on the ANZ's paper and also on RBA studies and statements
on this effect.
[239] Governor of the Reserve Bank, Mr I Macfarlane,
House of Representatives Standing Committee on Economics, Finance and Public
Administration, Official Committee
Hansard, 12 August 2005, p. 3-4.
[240] ANZ, Household
consumption and the wealth effect, p. 2.
[241] RBA discussion paper, Housing Wealth, Stock Market Wealth and Consumption: A panel analysis for
Australia, Nikola Dvornak and Marion Kohler, July 2003.
[242] See RBA,
Do Australian households borrow too much?, p. 4.
[243] RBA, Economic
Conditions and Prospects, Speech by Mr
Glen Stevens, Deputy Governor, 2 June 2004.