Australia's Foreign Debt
was the monetary policy to boost interest rates. When interest rates are high consumers are discouraged from borrowing money to spend on imports. But these high interest rates also put a lot of consumers and businesses heavily into debt. As a result, they cut back their spending, not only on imports but on locally made products as well. With spending down, suppliers began laying off workers and cutting production and soon the country was in the grips of a recession, with close to one million people unemployed.
Economists have different theories about how to solve out Foreign Debt crisis. However it is widely accepted that Australia must reduce its Current Account deficits, and try to turn them into Current Account surpluses. But achieving Current Account surpluses is more easily said than done. To succeed, Australia needs to boost exports and reduce our imports. The government is following this theory through a group of policies called microeconomic reforms. These policies are targeted at boosting efficiency in Australian businesses, which would in turn reduce the cost of producing goods and services. This would make Australian exports more competitive on the world market and give local industries and edge over imports.
Another approach, and the one which I personally believe is the answer to our crisis, is to encourage Australian households to save more. Currently the government charges us on all deposits into accounts. With our huge foreign debt, why are we being slugged for putting money away? The government should be introducing tax breaks for those who can save a certain amount of money each year. Maybe then people will not spend all of the money that comes into their pockets. All these savings would make it much easier for Australian firms to borrow money locally rather than having to seek it overseas.
The disheartening thing about these facts, is that unlike a country such as Japan, here in Australia we have enormous natural resources, enormous agricultural capacity and we have an educated and experienced workforce. We produce more of everything than we need, more wheat, more beef, more coal, more timber, and more steel. Other countries should be indebted to us and the fact that we are so far in debt when we live in a land so plentiful is a terrible indictment on successive governments.
We need to re-educate Australians such as you and I to save instead of borrow and also to concentrate on the efficient industries of Australia. If we can stop thinking of the present and instead think of the future of Australia, foreign debt can be controlled.