How is net foreign debt calculated?

Net foreign debt is calculated by determining the total amount of loans that Australia owns, across both corporate and government sectors, and subtracting the total amount of loans that foreign entities have lent to Australia. This method highlights the net position of debt, indicating how much the country effectively owes to the rest of the world as compared to how much it is owed by foreign lenders.

By focusing on the total stocks of loans held by Australia versus those owned by foreigners, option C presents a clear calculation methodology. It captures the essence of net foreign debt, as it emphasizes the balance of international financial obligations relative to assets.

Examining the other choices helps clarify why they do not accurately reflect the concept of net foreign debt. Total foreign loans received minus local loans given to foreigners does not account for the full scope of debt ownership. The second option oversimplifies the concept by including all outstanding loans without distinguishing between those owned by Australians versus foreign lenders. The option that describes total debt owed by both foreigners and Australians combines both sides of the equation without revealing the specific net position, which is a crucial aspect of understanding foreign debt dynamics.