Investing In Shares

Australia’s Net International Investment Position Blows Out

With Australia’s latest GDP and trade figures now released it’s become official…

Australia is one of the 10 WORST countries on a Net International Investment Position to GDP basis:

  1. Iceland: -398%
  2. Ireland: -190%
  3. Greece:  -133%
  4. Cyprus: -123%
  5. Portugal:  -106%
  6. Spain: -88%
  7. Croatia: -75%
  8. New Zealand: -65%
  9. Australia: -63%
  10. Poland: -61%

 

australia-net-international-investment-position-to-gdp

Not a good position to be in when your economy has just recorded the worst quarterly GDP results since the GFC!

In spite of a once in a century commodity boom (on the back of the industrialisation of the most heavily populated country in the world) we have managed to still be running a trade deficit in spite of higher coal and iron ore prices in Q3.

However with interest rates on the rise and Australia’s net foreign debt now over a trillion dollars we could quickly find ourselves in trouble if commodity prices drop like they did late last year (maybe due to an impending Chinese slow down in property development)…

More worrying is that Australia (unlike Ireland, Greece, Cyprus, Portugal, Spain and Croatia) doesn’t have Germany standing behind its creditworthiness. So if the world loses faith in our ability to pay…

Probably not worth considering just yet, and while iron ore prices and coal prices remain elevated, hope will prevail, but I do worry about just how far the AUD would need to fall (and the local austerity that would be required) for us to get back to a current account surplus to even begin paying down our foreign debts…

And I’d hate to think what a low AUD would do to interest rates in Australia (and our property bubble) if things slow in China even slightly (let alone here).

I think it’s time this issue moves to the top of the national agenda (not that there is much that can be done at this late stage).