Why the balance of payments and the current account deficit are so important.

Why Is the Balance of Payments and the CAD So Important The balance of payments is a summary of all Australia's transactions with the rest of the world. The balance of payments may give an explanation for, as an example, why the value of the Australian dollar has appreciated. A current account deficit occurs when the current account does not balance but is negative. The reason Australia has a current account deficit is because of …

…balance of payments disequilibrium should automatically be restored to equilibrium without the need for government policy. The balance of payments and the current account deficit are important in managing the Australian economy. This is because they give the government and other institutions (such as the RBA) an idea of where the economy stands in relation to the rest of the world. Many economic decisions can be made based on the information received from figures collected.