ipl-logo

Australia Financial Flow Essay

928 Words4 Pages

financial flows between Australia and the rest of the world during a given period of time. It is presented in two accounts: the current account and the capital and financial account.

The current account and the capital and financial account are commonly linked. Both accounts a related in terms investment flows and income flows, and ultimately allow the Balance of payments to sum to zero. The current account records are non-reversible transactions, including trade in goods and services and net primary (NPY) and secondary (NSY) income flows. The Current Account is known to maintain a cyclical as the deficit of around 2-7% of GDP, whilst maintaining an underlying structural average. Any impacts upon Australia’s international competitiveness, …show more content…

In Australia, if export prices are increasing relative to import prices, then Australia's terms of trade will improve, and vice versa. A higher term of trade means that exports receive higher price for the original output, which in turn increases export revenue and improves BOGS and reduces the CAD, and vice versa when for a lowered term of trade. From the beginning of 21st century, the commodity price boom has been the strongest influence on the CAD, with higher export revenue increasing the value of Australian exports, hence, improving the BOGS and causing a surplus in recent times. Australia experienced a doubling in its terms of trade, from 70 to 140 index points. In contrast, China and other emerging economies have improved Australia’s terms of trade, largely due to an inelastic demand for Australia’s raw commodities (increasing export prices), as well as flooding the international market with manufactured goods, decreasing import prices. Recently the 2015 year saw commodity prices it the hardest, falling 6.8% in the quarter and 13.5 per cent over the year in Australia dollar …show more content…

The savings and investment gap revolves around the problem that Australia is a relatively small economy with a historically low level of national savings reflected in the household savings ratio, averaging 3.6% in the last decade. This means that Australia tends to fund a large part of its investment through international borrowing (which increases foreign debt) or selling ownership in Australian assets (which increases foreign equity. However, in recent years the household-spending ratio has increased to 20 year highs, reaching 9.4% in 2013-14. This has increased savings and reduced Australia’s net borrowing needs, easing pressure on the NPI and reducing the CAD. This has been a result of Australian government introducing compulsory superannuation and fiscal consolidation that has encourages public saving. It is therefore, the saving and investment gap is linked to current

Show More
Related
462 Words | 2 Pages

Many people did not save because they had jobs that paid little, and all the money they made barely made it so that they could pay all the needs they needed to live for. On document 2 (DBQ) it states that “a regular saving of fifteen dollars a month” can help you in the long run, “at the end of twenty

Read More
950 Words | 4 Pages

According to former Australian Prime Minister Kevin Rudd, Australia is a nation whose origins lie firmly in the west, “but whose geo-political and geo-economic circumstances are shaped in large part by our location in the east… this is the inescapable expression of the Australian condition” ( ECONOMYWATCH CONTENT, 2017). Australia’s economy, as of this date, ranked in the top five of world. Australia positioned very well in the world and it able to export more than import of goods. This allows for a high profit margin and keeps the economy going and growing. Some of Australia’s factors that have helped keep the economy strong mining exports, manufacturing and telecommunications.

Read More
523 Words | 3 Pages

• Quick processing; • Quick transfer. Obviously, these are sufficient reasons to get rid of the stress of staying short on cash with Oz cash loans. You will be able to solve the problem effectively and move on with your life.

Read More
601 Words | 3 Pages

Introduction Like central banks in most industrialized countries, the Reserve Bank of Australia takes responsibilities for formulating and implementing the monetary policy by using a short-term interest rate as its operating instrument. To set the monetary policy, the RBA announces a target level for the cash rate, which is determined by the Board of RBA at its monthly meeting (RBA, 2003). As a member of the Board of RBA, a recommendation is raised that the RBA should decrease the level of cash rate by 25 basis point from 2.25% to 2% in May 2015. In this article, aiming to achieve three basic objectives of monetary policy, it will be discussed from three major aspects: iron ore price, Australian dollar and Sydney property market. Argument

Read More
687 Words | 3 Pages

Comparative Advantage and the CTFA In most countries, high levels of domestic production are a positive thing. Jobs are created and the country’s overall financial position is strengthened. However, international trade is key for a country to optimize its economic position.

Read More
919 Words | 4 Pages

Part B Li Zhang and Sai Krishna Vemuri 1. The key issues and outlook of political and economical situation of Canada Answer Although Canadian economy is known for being one of the most stable economies in the world, it still experienced the impact of drop in oil prices. It’s not just with a province (Alberta) but almost the whole nation went into rescission directly impacting Cad Dollar in the first half of 2015. Economists now predict there is a scope for rise in the economic growth rate from 2.5% to 3% in the third quarter. Bank of Canada already has cut down the interest rate twice in this year (BABAD, 2015)

Read More
538 Words | 3 Pages

The provincial and federal governments heavily tax the Canadians’ revenue, interest earned on savings, and dividends in order to raise tax revenues to maintain their governments. Saving is the source of the supply of loanable funds (178); when the interest rates are high, people have higher incentives to save more money because of the high return on their investments and save less when the return on their savings is not very attractive (182). Because of government tax regulations in Canada that tax the returns on investments so heavily, savings become less attractive for Canadians; in consequence, Canadian spending habits increases in areas that do not totally support the overall economic well beings of the nation. (Chapter

Read More
1344 Words | 6 Pages

 International trade will be critical for all the countries growth and economic growth: if the international trade volume has been decreased the production level will be dropped as consumers will fear for the spending and economic

Read More
272 Words | 2 Pages

The United States has the world’s largest economy. The US has the power to import and export goods at staggering rate. With the cost of shipping decreasing, reduced trade barriers, and with countries specializing in certain goods and services, trade is easier, and more practical than ever. Gross Domestic Product (GDP) is defined as “the market value of all final goods and services produced within a nation during a specific period of time – typically, a year.” (Lee Coppock, 2014) Included in a country’s GDP is all the goods and services exported.

Read More
529 Words | 3 Pages

With a majority of all industries open to a foreign competition and has skilled workforce that is readily available. Australia is withdrawn from most areas of the market, and competition in sectors which include sectors where financial services have increased. Their debt has been increasing since the global financial crisis but remains substantially lower than most advance economies. The labor polices in Australia are part of Australia’s oldest political party.

Read More
738 Words | 3 Pages

This reduces the purchasing power of households and it will also lead to a deterioration of the current account on the balance of

Read More
882 Words | 4 Pages

Australia top imports are Refined Petroleum, Computers, Cars, and Packaged Medicaments. The top import partners of Australia are China and the Unites state. The total value of all exports of Australia is about $245.9 billion. Total imports value of Australia is $254.7

Read More
2027 Words | 9 Pages

When your savings are invested and there is more flow, there will be more capacity for goods and services this creates jobs for people and greater prosperity. Many people criticized Keynes’ theories because it was hard to understand for people that these could work and make a difference. He very often got criticized because predicting output gap was very difficult. In keynesian economics the assumption is made that it is possible to know how much demand needs to be increased in order to be able to deal with output gap.

Read More
1173 Words | 5 Pages

National saving includes public and private saving. Household saving typically constitutes a major part of private saving compared to private corporations (Gersovitz, 1988; Rehman, Bashir, & Faridi, 2011). Saving is an important way to improve the well-being of household. It allows households to smooth consumption in case of high income volatility and increase the opportunity to invest in physical and human capital (Ashraf et al., 2003). For households, the tradeoff between current and future consumption results in saving (Sturm, 1983).

Read More
1103 Words | 5 Pages

Second, the savings rate varies by age. Working age people save the most and also because they have a reason to save in anticipation of retirement. If the elder are not working or have little income, thus they have little or no ability to save. If a country has a high share

Read More

More about Australia Financial Flow Essay

Related Topics

Open Document