I had my lunch break and have just read your post.
Yes, these are long term issues. Australia's current a/c deficit has been ongoing for over 30 years. It would be OK if the money had been spent on capital and infrastructure investments, but the bulk of it has been spent by the household sector (over $800 billion in household sector debt).
In 1989, the foreign debt was around $135 billion and was front page news. These days, at $430 billion, not many people look at it, probably because no one knows what to do with it.
In 1996, when Howard and Costello were in opposition, they rolled out a "foreign debt truck" with a huge billboard stating foreign debt of $196 billion, suggesting that it was a big problem.
When they took office, they never mentioned the foreign debt again. It is likely that no one knows how it is ever going to be repaid. It keeps growing. I do not know what the country's credit card limit is, but say we hit $600 billion and foreign lenders stop lending any more. What happens? Simple, the standard of living falls very quickly and severely.
You mentioned Japan. Despite being in stagnation/recession for around 15 years, Japan never stopped saving as a nation. It owns around 33% of global credit supply. Its government borrowed heavily from its people to spend on some huge fiscal pump priming to try to lift the economy, but it was all Japanese money.
Australia has been spending $105 for every $100 it produced for some years now. Does anyone think this can continue forever?
How is the $430 billion (probably $450 billion by now) owed in foreign debt ever going to be repaid and over what time frame? I doubt anyone knows.
