84% Of Australia’s Debt Owed To “Non-Residents”

Let us return to a topic covered previously ( Who Owns 73% Of Our Debt? ; Our Government *Officially* Does Not Know Who Owns More Than 60% Of Australia’s Debt ).

According to the RBA’s most recent statistics, 84% of the “public” debts being accrued by Green-Labor are owed to “Non-residents”.

$187.6 billion, out of a total $223.3 billion, at end December 2011.

A new all-time record level of indebtedness to foreigners:

Source: RBA Statistics, E3 Commonwealth Government Securities Classified By Holder | Click to enlarge

Australia, you are being sold out.

As Mark McGovern of QUT’s Business School observed in the must-read Australia’s Debt Dreamtime:

Click to enlarge

The net external wealth of Australia has deteriorated across the generation (McGovern 2010b, from which Figure 1 is drawn). Calculation of external wealth is based upon cumulative financial surpluses from an essentially zero basis in 1960. As is evident, Australia has been increasingly building external liabilities. A particularly marked decline has occurred over the last decade resulting in a total external exposure of $820b as at June 2010 with an annual deterioration of over $50b.

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The central conclusion is stark: all the efforts of a generation of Australian men and women have only made them more obligated to the rest of the world. All that reform, all those industry and government initiatives, all those strategies, all that talk of productivity, all the promises of a previous boom in mining – all have come to naught. Today, we stride the world stage with external debts and other net liabilities above seventy percent of GDP, and increasing. Unaddressed, this is a precursor for crisis…

And as Delusional Economics recently observed (emphasis added):

So where is it all going ? Well if we breakdown primary income into its component parts we get the result below. This tells us that the major components of our primary income deficit are from direct investment income and portfolio interest payments to the rest of the world:

Source: MacroBusiness | Click to enlarge

Which basically means that in aggregate Australia sends massive amounts of dividends and interest payments to the rest of the world. In fact it is so large that it is dwarves our trade in goods and services, resulting in a net loss  to the external sector even during the historically high terms of trade. The most important thing to note is that these are payments stemming from previous foreign investments meaning Australia is continuously making payments to rest of the world somewhat independently of the balance of trade.

Finally, the financial account tells us that in order to maintain this current account deficit, Australia continually relies on foreign direct investment capital flows along with sales of equities:

Source: MacroBusiness | Click to enlarge

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So in other words we sold lots of new financial assets to foreigners so we could pay them the interest we owed them stemming from their previous purchases. Sounds a little ponzi-ish doesn’t it?

And as reader Craig so eloquently and insightfully observed in comments to Saturday’s post about the Foreign Investment Review Board being – in the words of Barnaby Joyce – “full of merchant bankers“:

In Australia, everything is up for sale to foreigners and always has been. The FIRB is absolutely useless; a bunch of doctrinaire econocrats spouting the Treasury Line. These are people, just like the rest of the governing class actually, who have no sense at all of the national interest. Patriotism is a dirty word for them. I’m not surprised the Liberals couldn’t give a toss about selling off the farm. When Lenin once observed that if the Bolsheviks starting hanging some of the bourgoisie, the others would compete among themselves to sell them the rope, he had people like the members of the Liberal Party in mind.

What a dreadful choice we Australians are left with; between a bunch of socialist incompetents on the one hand and money-grubbing traitors on the other.

You know what they used to do to traitors?

Tags: CGS, public debt, RBA