Flow of Funds

Funds available for loans

Supply of Funds / Loaning

Demand for funds / Borrowing

Individuals

Saving up for future needs

Businesses

If profits strong and no immediate need for funds

Interest rates is at level where maintaining deposit funds is likely more lucrative than invest in expanding

Governments

When surplus exists in budget

(i.e. revenue > expenditure)

Individuals

Home loans - mortgage

Personal loans (holiday, uni, car)

Credit card

Governments

Raise level of economic activity (borrow --> increase spending / tax cuts)

Expenditure > Revenue

Pay off existing debt

Maintain positive financial balance

Businesses

Starting up business

Expanding business

Invest in research and deveopment

Overcome downturns in cash flow

International Sector

Australia's low saving rates --> overseas savings --> finance domestic consumption + investment --> recorded as foreign liability and repaid

Foreign debt grown ($976bil in June 2015)