March 2010 Current Account numbers released today by the Australian Bureau of Statistics are a continuing testament to how Australia is impoverishing itself:
The increase in foreign debt caused by the persistent current account deficits has to be serviced. In 2008 and 2009 Australians had to come up with just under AUD 40 billion in interest payments alone to meet its foreign debt obligations. If interest rates go up, as they must eventually, Australia is going to find it hard to service its debt and maintain its high standard of living.
Even though a lot is being made of the improvements in our terms of trade, we will never earn enough on our trade account to pay back this debt. Now, with the government also going into debt, the situation is at risk of getting worse. We live in a world where debt is increasingly becoming a dirty word, and we have loads of it.
Position wise I'm short AUDUSD but will exit if .8600 breaks.
Disclosure: short AUDUSD