But at the same time, the reduction in offshore borrowing by the banking system has been putting downward pressure on it. The net effect of all these flows however, is that the Australian dollar is higher than one would expect, given fundamentals such as the terms of trade and interest differentials.
Turning to another effect of the pattern of resources investment funding on Australia’s balance of payments, as noted above, around 75 per cent of the foreign direct investment in the resources sector since 2007 has been in the form of reinvested earnings.