For the last thirty years Australia has experienced a deficit on Current account. This has occurred as a result of a variety of contributing factors including the level of national savings, problems with international competitiveness and adverse views on the $A. This deficit on the current account has had a large impact on external stability, which exists when Australia's trade and financial dealings with the rest of the world do not create significant concerns.

Firstly, Australia's on-going net foreign debt can be largely attributed to Australia's level of national savings. National savings; which is a representation of household savings + government savings and firm sector savings has been a cause of much concern. Saving's grew rapidly during the 80's as a result of a rise in profitability and a fall in the level of...