If Australia's current account is in deficit, net foreign investment must be negative by the same amount.

Question

Quizplus · Accepted Answer

Net foreign investment (NFI) represents the difference between the amount of Australian assets owned by foreigners and the amount of foreign assets owned by Australians. If Australia's current account (trade balance plus income from abroad minus income paid to foreigners) is in deficit, it means that the country is importing more goods and services than it is exporting, and thus it is receiving less money from abroad than it is sending. As a result, NFI must be negative by the same amount as the current account deficit, since foreigners are investing less in Australia than Australians are investing abroad.

If Australia's Current Account Is in Deficit, Net Foreign Investment