Foreign Investment Data Interpretation

Answer the questions that follow each piece of data.

1. Explain the contents of the graph and the trends in the three measures.
2. Explain how net foreign equity can be less than zero percent of GDP.
3. Explain how the data reflects recent economic events and phases of the business cycle in Australia.

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 1. Using the data above, explain how foreign investment affects Australia’s balance of payments. Your answer
should include explanations of the initial investment as well as returns on investment.
2. Explain why Australia has a persistent current account deficit (and financial account surplus).

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 1. Calculate Australia’s net foreign liabilities.
2. With reference to the data, explain the recent trends in Australian foreign investment.
3. Give possible reasons for the volatility in foreign investment in the last 3 years.

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 1. Explain the changes in public and private foreign debt in recent years in Australia.
2. Comment on the changes to total foreign debt over recent years in Australia.

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 1. Explain the relationship between net foreign debt and interest payments.
2. Explain how net foreign debt could have risen by a greater amount than interest payments between 2013 and
2018 in Australia.
3. Why might economists measure net foreign debt and interest payments as a percentage of GDP?

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 1. Comment on the distribution of foreign investment in Australia over the last 15 years between the three
investment categories above.
2. Explain why there are more of some categories of investment than others in Australia in the last 15 years.
3. What categories are most stable and most volatile? Explain why that might be.

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 1. Which industries currently attract the most foreign direct investment into Australia? Use statistics from the data.
2. Give reasons why the industries from Question 1 might attract the most FDI compared to other industries listed.
3. List the approximate percentage share of FDI in Australia by country in order from largest to smallest. What
surprises you about this list? What is familiar about this list?

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