Status of Australia's External Position, We Should

¶ … status of Australia's external position, we should first briefly explain the sign conventions, as they are presented in the explanatory notes 3 to 5. As such, International investment position statistics follow the sign convention used in the balance of payment: for foreign assets, "position data and any transaction increase or other flow increase in assets is shown with a negative sign." This is why all the positions noted as Australian investment abroad are marked with a negative sign, so as to show a cash flow leaving the country.

At the end of the analyzed period (September Quarter 2003), the total Australian investment abroad amounted for $477,188 million, an increase of almost $14,000 million from the beginning of the period (around 3%). The main components of the investment abroad are direct forms of investment (such as equity capital and reinvested earnings) and portfolio investment assets, these two forms of investment accounting for some 67% of total investment. Both types of investment have suffered slight increases from the beginning of the period, the direct investment increasing with 3% and the portfolio investment with some 3.5%.

Other components of the Australian external position included financial derivatives and loans. The first category has suffered a slight decrease during this period, which denotes a lesser inclination towards risk, possibly because of the unstable global economic climate during this period. The loan section has, however, suffered an important increase, with over 11%, mainly due to a serious increase in loans to depository corporations. Let us now analyze some of the data we have used above and perhaps find some possible explanations for it.

As I have said here above, the Australia's external position has shown a positive trend during the September quarter of 2003, with increases in the main categories and a general increase in Australia's foreign position with an overall %. This was probably motivated by the recovering global economic and the new possibilities of investment abroad that have come with it. Indeed, the two main positions that account for two thirds of the total foreign position have both encountered increases in their value.

The first one, direct investment abroad, refers to the purchase of a package of shares that allow direct control of the company or organization or to building a new facility on open ground. As we have seen, Australia has had an active position in this sense, increasing its direct foreign investments. This was probably brought about by an ease of tension at the international level and new possibilities for foreign investments. The portfolio investment assets represent certain types of investment.