During the past two decades, Australia's persistently high current account deficit has been seen as one of the economy's greatest economic problems. During this period, Australia has run a CAD higher than almost all of its major trading partners, with a CAD fluctuating between 3-6% of its GDP on a cyclical basis. At present, Australia's CAD is at its upper end of that range at 5.7% of GDP per capita or 42.5bn dollars. The danger of a high CAD is the limit it places on the growth of the economy, and the burden it places on the economy in future years by raising foreign liabilities. The current account is one side of the balance of payments, which records all of Australia's transactions with the rest of the world during a given period. The current account records non-reversible transactions and has three components – the balance of goods and services (exports, imports and service credits and debits), net income (income received minus income paid to foreigners, covering items such as interest rates on overseas loans and returns on foreign equity investment) and current transfers (reflecting one-way transactions).
             The persistence of a deficit on the current account indicates that Australia's debit on goods, services, and income payments exceeds its credits. In 2002-3, the CAD rose to $42.5bn or 5.7% of GDP from $21.6bn or 3% of GDP in 2001-02. This considerable rise in the current account deficit in 2003 reflects a significant deterioration in the balance of goods and services due to cyclical and structural factors. The outcome of the balance on goods and services shows a cyclical trend over time, influenced by changes in the level of growth in Australia and the world economy. In 2002-03, the domestic economy in Australia grew strongly. This growth caused falling unemployment and an increase in income, which fueled an increase in imports by 10%. At the same time, the global economy experienced a dip in the international business cyc...