Austrlia - Balance of Payments and the pressure on the dollar

Introduction In 1995, The Economist ran an article comparing the current account deficit in Australia at the time to that of Mexico just before the Mexican Peso's devaluation in 1994. At the time, the current account deficit in Australia was 5% of gross domestic product (GDP). Over the next five years, the comparison proved itself to be accurate as the Australian dollar lost over 40% of its value. Currently, there are signs that an even larger problem is looming …

…hand, has repeatedly sounded the alarm and has even raised interest rates twice in an attempt to throw a bucket of cold water on the over exuberance currently threatening the Australian economy. References: Reserve Bank of Australia http://www.rba.gov.au/Education/exchange_rate.html The Economist http://www.economist.com/displaystory.cfm?story_id=2517397 http://www.economist.com/displaystory.cfm?story_id=2524281 China Economic Net http://en.ce.cn/World/Asia-Pacific/t20040602_981505.shtml