Assume the capital account balance in Australia is approximately zero. The large current account deficit in Australia implies that:

1. foreign countries invest more in Australia than Australia invest in itself.
2. Private savings have been at historically at high levels.
3. Foreign Investors lack confidence in the strength of the Australian economy and the buying power of Australian consumers.
4. There has been little or no foreign investment in Australia.
5. Exports are greater than Imports.
7. Note: I favour Answer 1.