Balance Of Payments Essay
Q: Analyse the impact of changes in the global economy on Australia’s Balance of Payments.
The Balance of Payments is a record of all of Australia’s transactions with the rest of the world in one year. There are three main components; the current account (CA) and the capital and financial account (KAFA). The current account concerns the balance of goods and services, net primary and net secondary income. The capital and financial account consists of foreign aid, intellectual property, investment (direct, portfolio and other investment), reserve assets and financial derivatives. Globalisation refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and the economy. Therefore, globalisation has allowed for the liberalisation of trade and capital flows. While globalisation has allowed trade to grow, it has also increased trade imbalances, creating tensions and pressures for protectionist policies.
The current account shows the money flow from all exports and imports of goods and services, income flows and non-market transfers in a period of one year. The relationship between the current account and capital and financial account is that the two accounts add up to zero. Thus, the current account deficit is equal to the capital and financial surplus. The capital and financial account is concerned with the financial assets and liabilities. Foreign investment in Australia was $46, 786 million from 1980-81 and has increased to $886, 768 million from 2000-1 and most recently $2, 609, 729 million from 2013-14. Australia’s financial flows have grown so rapidly since the AUD was floated and financial markets were opened in the 1980’s. The financial account components have had more deficits than surpluses. In the years from 2013-14, direct investment was in a surplus of $53.2 billion, portfolio investment was in a $38.6 billion surplus, financial derivatives was in a $15.9 billion deficit,
The Balance of Payments is a record of all of Australia’s transactions with the rest of the world in one year. There are three main components; the current account (CA) and the capital and financial account (KAFA). The current account concerns the balance of goods and services, net primary and net secondary income. The capital and financial account consists of foreign aid, intellectual property, investment (direct, portfolio and other investment), reserve assets and financial derivatives. Globalisation refers to the integration between different countries and economies and the increased impact of international influences on all aspects of life and the economy. Therefore, globalisation has allowed for the liberalisation of trade and capital flows. While globalisation has allowed trade to grow, it has also increased trade imbalances, creating tensions and pressures for protectionist policies.
The current account shows the money flow from all exports and imports of goods and services, income flows and non-market transfers in a period of one year. The relationship between the current account and capital and financial account is that the two accounts add up to zero. Thus, the current account deficit is equal to the capital and financial surplus. The capital and financial account is concerned with the financial assets and liabilities. Foreign investment in Australia was $46, 786 million from 1980-81 and has increased to $886, 768 million from 2000-1 and most recently $2, 609, 729 million from 2013-14. Australia’s financial flows have grown so rapidly since the AUD was floated and financial markets were opened in the 1980’s. The financial account components have had more deficits than surpluses. In the years from 2013-14, direct investment was in a surplus of $53.2 billion, portfolio investment was in a $38.6 billion surplus, financial derivatives was in a $15.9 billion deficit,