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Question: suppose the australian government has contacted you to discuss their...

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Suppose the Australian government has contacted you to discuss their recent budget decisions.  They are particularly interested in your views regarding the effect of the expenditure and revenue patterns,  both shown in the picture below, on the current account and net foreign wealth of Australia in the next four years.  How will public savings change in the next four years? Will this cause a current account deficit? What will be the effects on the Australian net foreign wealth? Should the government be worried about the economic implications of their budget decision? Explain your answers building formal arguments based on what you learned in this unit.

 

 

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