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.