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foreign investment

QuestionAnswer
define foreign assets The stock of Australian investment abroad (debit in the financial account).
define foreign liabilities The stock of foreign investment into Australia (credit in the financial account).
what is the equation for net foreign liabilities Net foreign liabilities = total liabilities – total assets
define foreign debt Amount of money that AU residents owe to the rest of the world.
define foreign equity The extent to which foreign residents own Australian assets.
what is an example of foreign debt? AU company receives Bond or a Loan
what is an example of foreign equity? AU company sells shares or stocks
what is the equation for net foreign debt Net foreign debt = gross debt – value of Aussie loans to overseas
why is private debt superior to public debt? mostly leads to expansion + increased future income
when does public debt increase? during downswings the governments try to soften recession impact
what do increased foreign liabilities do to the financial account? credit into financial account = Financial account surplus (FAS)
what do increased foreign liabilities do to the current account? increase in primary income debits =current account deficit (CAD)
what is the savings investment gap? AU has low savings (small population) so uses overseas investment to finance economic growth.
define foreign direct investment Over 10% investment in a foreign enterprise, aims to influence its management and obtain lasting interest.
define portfolio investment Ownership of a financial asset with the expectation that it will grow in value over time.
what are key benefits of foreign debt? (most important) - Higher real income and higher living standards - Increases employment and econ growth
what are key costs of foreign debt? (most important) - Unsustainable borrowing may = credit rating downgrade - If AUD depreciates, burden of foreign-denominated currency loans increases
Created by: efeosa
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