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Benefits of Trade
- Boosts national production
- Increased employment
- Increased income
- Lower inflation (cheaper imports)
- Increased consumer choice
- Develop international relations
- Provide access to different resources
- Allows countries to specialise their production
Australia's Balance of Payments
- Definition
Quarterly statistical record of Australia's financial transactions with the world
= exports - imports
- Current Account
Consists of:
- Net goods
- Net services
- Net primary income
- Net secondary income
Current Account
- Net goods (definition)
Dollar value of exports minus imports of goods
= Balance on Merchandise Trade / Trade Balance
(BOMT)
- Balance on Goods & Services (definition)
= Net Goods and Net Services
- Net services (definition)
Dollar value of exports minus imports of services
- Net primary income (definition)
Dollar value of international transactions
EG: interest on debt, rent on property
- Makes up significant portion of Australia's Current Account
- Net secondary income (definition)
Dollar value of gifts, taxes, pensions, foreign aid
- Only a small portion of the Current Account
- Capital and Financial Account
- Capital Account (net capital transfers & net acquisition of financial assets)
- Net Investment (direct & portfolio investment)
- Net Reserve Assets
- Net Errors & Omissions
Direction of Australia's Balance of Payments
Surplus in Capital & Financial Account
Due to:
- Australia has relatively weak exchange rate
- Good opportunities for investment (abundant natural resources, access to skilled labour, economically free, politically stable)
Deficit in Current Account
- Not in debt, if it can be afforded to pay it back
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