... upon the economic growth rates of itself and its main trading partners' eg Japan and ASEAN. Strong economic growth at 3.5-4% in Australia in recent times (2000/01) have increased the CAD as a result of rising imports, particularly because most of Australia's imports are capital and intermediary goods. The strength of Australia's main trading partners also determine Australia's CAD as Australia's main exports are minerals and agricultural goods which are highly demanded during economic growth. The incomes account calculates the payment for the use of factors of production and is the main contributor to Australia's large CAD. It is the main link between CA and KFA. An increase in any form of foreign capital and/or financial inflows would worsen the CAD as it must own some form of return and this return is recorded as a debit in the income account. Australia over the years has had a CAD fluctuating ...

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