We have run a CAD continuously for the past 50 years save for one year we had a small surplus back in about David Gruen of Treasury has publically acknowledged that if the NY and London cannot be relied upon to keep the funds flowing then externally funded economies must act more prudently. The main destination of foreign capital is the Aus housing market. Life is a jungle. The country’s real rate of growth last year hit 4 per cent – and unemployment fell to 4. But whereas in oil rich countries the practice of extracting a finite resource is contributing to a net national wealth, in this country is is just acting to make the CAD less negative.

But that is only half the story. To build massive extensive cities that require expensive infrastructure and exhibit the de-civilising problems that accompany them. The conclusion I wish to draw then is that there can be perfectly good reasons why current account balances are not zero, and indeed can even be quite sizeable, without them constituting imbalances or being a cause for concern. Canada increased GDP by 2. Lenders of capital expect to receive the money they have lent back with interest dividends if it is an equity investment. Story continues below advertisement.

Now it ran larger deficits. So what is the point in a SWF if it is not being funded by accumulated national wealth? If banks were lending only savings, I could consider that as a legitimate business.

Most of us are limited to lending only what we have saved. Wherever is it, i like to look over more to do with that publishing, thanks. Can thhesis overnight cash rates back to 3.


pitchford thesis australia

Much of this concern appears to stem from a fixed exchange rate world. Will lack of investment make us more of a nation?

Follow us on Twitter globebusiness Opens in a new window. SinceAustralia has recorded a real, average annual increase in per capita GDP of 1. Guy admits as much.

Pitchford Thesis Current Account Deficit

Bank lending allows the borrower to buy products to which they are not entitled. Non-subscribers can read and sort comments but will not be able to engage with them in any way. How can I browse recent Australian theses? If you are looking to give feedback on our new site, please send it along to feedback globeandmail.

Adrian The movement of manufacturing industry to use cheaper labour is perfectly sound economics. The more I think about it, the more your point makes such obvious sense, I wonder why so many of us have never put two and two together.

Pitchford Thesis Australia

We have run a CAD continuously for the past 50 years save for one year we had a small surplus back in about He was persuasive, especially at home, sending Australia in precisely the opposite direction to Canada.

There is not a net national wealth gain taking place. Professor Pitchford, now retired from Australian National University in Canberra, remains remarkably relaxed about Australia’s current account deficits. Back in the s, an Australian economist named John Pitchford made the counterintuitive case – now known as the “Pitchford thesis” – that market-driven countries should learn to love current account deficits.


One place to start is with an overlapping generations model of a closed economy,[ 7 ] which we can think of as a country. Such a scenario does not directly translate into a world of floating exchange rates. It would occur because a lack of external financing causes a credit crunch and recession.

Stop worrying, and learn to love trade deficits

The economic failure is when the exchange rate rises to synthetically raise wages and force industries and jobs offshore, leading to failing industries, unemployment and lower real incomes. Capital inflows dry up rapidly and capital outflow increases, necessitating a sharp contraction of domestic demand so that the trade balance moves into surplus. However, I take umbrage with a couple of assumptions here. Australia had run current account deficits for years. Pitchford Thesis Australia top writers online!

Virtually any human will take the opportunity to make money as long as it is legal, x-gen, y-gen, baby boomer.

pitchford thesis australia

There was no stagflation in Once upon a time you need to enslave the native population to do this!! However, what happens when the middle generation is much bigger and more avaricious than the generations that came before and after it? We hope to have this fixed soon.

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