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How Does The Exchange Rate Affect Australian Economy

656 Words3 Pages

Australia's exchange rate is the value of the Australian dollar relative to other currencies. It plays a significant role in shaping the domestic and global economy, as it affects the country's imports, exports, and financial transactions with other countries. The exchange rate movements can have both positive and negative effects on the economy, depending on whether the value of the Australian dollar increases or decreases. This essay will analyze the effects of how the movements of Australia's exchange rate can affect the performance of the domestic and global economy. The exchange rate plays a crucial role in determining the competitiveness of Australian exports in the global market. A depreciation in the value of the Australian dollar increases the competitiveness of Australian exports, making them more affordable and attractive …show more content…

This was largely due to the depreciation of the Australian dollar, which made exports more affordable for foreign buyers. On the other hand, a strong Australian dollar can make exports more expensive, reducing demand for Australian goods and services in the global market. This can lead to a decline in export revenue, a decrease in job opportunities, and a negative impact on the domestic economy. The exchange rate also affects the cost of imports in Australia. A depreciation of the Australian dollar makes imports more expensive, leading to higher prices for imported goods and services. This can increase inflationary pressures in the domestic economy, reducing consumer purchasing power and lowering living standards. However, a strong Australian dollar makes imports cheaper, leading to lower prices for imported goods and services, and potentially reducing inflationary pressures in the domestic

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