Topic Two
Australia’s place in the global economy
Australia’s economy ranks 15th amongst the advanced economies making it larger then 200 economies in the world. But compared to the big economies, like the US and Japan, Australia is relatively small.
Trends in Australia’s trade flows i
Trade has always represented a large proportion of Australia’s economic activity even though it is geographically isolated and only has a small population.
• In the 1950’s Australia’s main trading partner was the United Kingdom, but due to the establishment of the EU, Australia has gone away from the UK and nowadays our major trading partner is Japan. The Asia-Pacific region is by far the most important trading partner that Australia has.
• Australia has traditionally had a comparative advantage in the production and exporting in the primary industry, unlike other high-income countries, Australia is less competitive in the production of manufacturing.
Trends in Australia’s financial flows
The rate of growth in financial flow has been much faster then trade, as international businesses invested into Australian companies. Deregulation has been a major reason for this dramatic increase in financial flows.
The Balance of Payments
The balance of payments is a record of all economic transactions between Australia and the rest of the world over a given period of time. It is broken into two accounts:
• The current account
• The capital and finance account
The Current account shows all money flow from all exports and imports of goods and services, income and current transfers for a period of time.
Net goods – refers to the difference between what Australia receives for its exports and pays out for its imports.
Possible outcomes:
• Balance – where export receipts = import payouts
• Surplus – where exports > imports
• Deficit – where imports > exports
Net services – refers to service are bought and sold without people receiving a good.
The balance of...