Application Exercise 8d: Analysing the current account
Choose three transactions from the list in Table 8.6 above and explain:
- How the transactions would create a ‘future financial obligation’ and identify the type of obligation created.
- How the ‘future obligation’ would be recorded on the current account and whether that future flow will be a debit or a credit.
| Question 1: Future obligation created | Question 2: How future obligation recorded on Current Account (credit/debit) |
A | When an Australian superannuation fund purchases shares in Apple on the NYSE, in future Apple will be required to pay dividends to the Australian owners while the Australians hold the shares. | Payment of dividends to Australian owners recorded as a credit on Net Primary Incomes sub-account of Current Account (CA).
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B | The Timor-Leste govt will need to pay interest on the loan, and repay the principal of the loan in the future | Payment of interest to Australia’s govt recorded as a credit on Net Primary Incomes sub-account of CA. |
C | Fox news will need to continue to pay for the license into the future (intellectual property royalties) | Payment of licensing fees recorded as a credit on Net Primary Incomes sub-account of CA. |
D | No Obligation created | NA |
E | In future, Telstra will be need to pay dividends to the German owners while they hold the shares. | Payment of dividends to German owners recorded as a debit on Net Primary Incomes sub-account of Current Account (CA). |
F | American bank needs to pay interest to Australian household. | Payment of interest to Australian savers recorded as a credit on Net Primary Incomes sub-account of Current Account (CA). |
G | No Obligation created | NA |
H | Tesla no longer obligated to pay dividends to VicSuper | NA |
I | As the mine makes a profit, these will be repatriated to Chinese mining company (as owner) | Payment of profits/dividends to Chinese company recorded as a debit on Net Primary Incomes sub-account of Current Account (CA). |
J | Aust. Govt is obligated to pay interest to any foreign bondholders | Payment of interest to the overseas buyer of the bond recorded as a debit on Net Primary Incomes sub-account of Current Account (CA). |