AUS trade and financial flows Flashcards
(24 cards)
what are international trade flows ?
exchange of g/s across national boundaries
- includes debt, equity, forex, derivatives + international finance and investment
what is a portfolio investment?
the purchase of financial securities
eg. equity securities ( shares, options, rights) and debt securities ( bonds and notes)
what is direct investment?
when someone overseas establishes a new business or acquires > 10% of an Australian enterprise ( have a degree of control over operations)
What are some feature of international trade?
- more than one currency
- dominated by MNC
- affected by changes to international business cycles, technology, eco policies
what are risks of international trade?
- loss of earnings from adverse currency movements
- changing market demand
- commodity prices
- interest rates
- gov eco policy
what is trade intensity?
exports and imports of g/s as a % of GDP
what are the forms of foreign investment in AUS?
- direct investment
- portfolio investment
- other foreign investment
- financial derivatives
what are financial derivatives?
a contract between parties which derives its value from an underlying asset
- eg. currency swap, options
what are the forms of other foreign investments?
- trade credits
- loans
- currency
- deposits
what are the advantages of foreign investment in AUS?
- access foreign exchange
- employment opportunities
- increased access to export market
what are the disadvantages of foreign investment in AUS?
- loss of ownership and control
- cost of servicing debt and equity borrowings
- volatile nature of speculative portfolio capital flow impacts exchange rate
what are the forms of AUS investment abroad?
- direct investment abroad
- portfolio investment
- other AUS investment abroad
- financial derivatives
- reserve assets
what are reserve assets?
- foreign financial assets available to and controlled by RBA for financing payments and dealing in foreign exchange
what is AUS investment abroad and why is it growing?
stock of foreign financial assets owned by AUS residents
- rising offshore interest of major AUS companies
- secure new export markets
- diversify activities
- earn higher return rates
- avoid taxes
what is an international investment position?
total foreign liabilities ( AUS debt and equity borrowings from abroad) - total foreign assets ( AUS debt and equity lending abroad)
what is AUS’s current international investment position?
net borrower of funds
- liabilities > assets
- import capital to supplement insufficient domestic savings
- has a large stock of total foreign liabilities
what have been some major events that have impacted international trade flows?
- GFC 2008-9
- USA/CN trade wars 2018
- COVID19 2020
- CN/AUS trade tensions 2020-21
- global high inflation and interest rates 2022-23
what have been some major changes in AUS internationalisation and globalism?
1980s - AUS more integrated with global economy through gov policies
1983 - deregulation of financial system
1990s - integrated global economy through ICT
2000s - global resource boom
1980s->2000s - reduced levels of protection
what were the effects of deregulation?
- increased exchange rate volatility
- greater accessibility for AUS firm to world markets
- lower export/import costs
what is AUS g/s exports composed of?
2022/23
- 11% rural
- 62.4% mining
- 13% manufacturing
- 13.6% services
what is AUS g/s imports composed of?
2022/23
- 25.2% consumption goods
- 36.2% intermediate goods
- 19.1% capital goods
- 19.5% services
what are some trends in AUS trade patterns?
- moved away from EU and UK to Asia + Pacific since 1960s
- approx 80% exports to Asia
approx 25% imports from CN
what has cause AUS export/import growth?
- greater trade intensity
- trade liberalisation with Asia Pacific
- bilateral agreement with major trading partners
what are trends for foreign investments in the AUS ?
- main growth 2004-8 from mining resources boom
- 1976 federal gov established foreign investment review board -> rejected some proposals
- main source USA, UK, JP, HK, CN, SNG, NZ
