Analyse the impact of changes in the global economy on Australia’s Balance of Payments. HSC

787 Words Apr 12th, 2014 4 Pages
Australia’s Exports (in particular the international competitiveness) affects Australia’s continuous CAD alongside terms of trade, international borrowing, fluctuations in the exchange rate as well as foreign investment. The Balance of Payments is essentially all transactions that Australia has against the worlds trade over a given of time; showing the trade and financial flows in Australia’s Economy. Cyclical and structural factors are the main reasons of this balance position.
The greatest ramification on Australia’s Balance of Payments recently has been changes in Australia’s terms of trade. Terms of Trade (which shows the relationship between the prices Australia receives for its exports and prices it pays for its imports), in the
…show more content…
One of the most sensitive issues of debate in Australia is the growing foreign ownership of Australian agricultural land. Public concern about overseas investors buying Australian farms was highlighted in August 2012 when the Australian government approved a proposal by a consortium led by Chinese textile company Shandong Ruyi to buy Cubbie Station in Queensland, the largest cotton farm in Australia. So while having foreign investment in Australia is seen as a positive, it also has to be monitored on how much overseas investors own and hhave control of as it can become a large issue.
Additionally, a number of cyclical factors impact on both Australia’s curerent and capital and financial accounts. Firstly, rates of economic growth in Australia compared to the rest of the world will impact on both accounts. The Gfc in 2008-09 severely affected the CAD. The value of exports out of Australia decreased, thus worsening the CAD. However in 2009-10, the CAD was -$53.2 billion, reflection a deficit in the goods and service balance $-3.9 billion and a larger net primary income deficit of -$47.7 billion. A major structural change took place in the CAD which was a result of strong mining exports and higher commodity prices. The balance of goods and services was a surplus of $20.8 billion. Thus showing that a structural change in Australia’s economy largely affects Australia CAD.
Nonetheless, the movements in the exchange rate affect the international

Related Documents