Trade patterns and determinants in selected trade deficit categories in Australia: 1990-2006

The Australian Trade Deficit (TD) has been increasing in the past 50 years, and this deficit has become more significant in the last few decades. This rising TD level in Australia has brought the national debt level to a new height, making this country one of the world‟s highest debt-ridden countries. The most alarming fact associated with these trends is that Australia‟s ability to service the increasing debt levels in the future has been diminishing since the increasing debt levels in Australia have been predominantly used for Consumption (C) rather than for gross capital formation. The diminishing ability to service the increasing debt levels in Australia is due to the fact that the TD level is increasing as a proportion of the Australian Gross Domestic Product (GDP), while the Australian gross capital formation as a proportion of the Australian debt is one of the lowest amongst the major debtor countries in the world.