10  4  However, significant current account deficits persisted even after the floating of the Australian dollar and fiscal consolidation. 13 This gave rise to the so-called ‘consenting adults’ thesis, that current account deficits produced by private sector decisions could be optimal and sustainable, and policymakers would not have to worry about them.
Reflecting on other country experiences, the simple fact that deficits were privately contracted seems insufficient. We know private sector flows can be dangerous: clear recent examples are Spain and Ireland’s experiences during the euro area crisis. It therefore seems relevant that foreign investors in Australia were willing to accumulate claims denominated in Australian dollars, and that the Australian dollar floated.