Australia is a large net borrower from the rest of the world. A large deficit in a capital account along with a deficit in the balance of trade while the currency is rising are all strong evidence that Australia has a problem with currency speculation.
Currency speculation, sometimes called “hot money” , needs to be controlled because it can cause some serious imbalances in the local economy both on the way in, and on the way out. There are a number of well-known symptoms for hot money in-flows, these include:
• Asset bubbles
• Currency appreciation