Balance Of Payments

Question 1

Define the Balance of Payments

Answer 1

The balance of payments refers to a systematic record of all economic transactions between residents of Australia and residents of the rest of the world.

Question 2

Trends within the current account

Answer 2

Trends within the current account
The Goods within the current account fluctuates considerably from year to year.
In 2017 we record our first surplus since the 70’s. (due to an increase in commodity prices)
The Trade balance depends of factors such as: Commodity prices, Climatic conditions, Natural disasters, etc…

Question 3

Explain the Current Account

Answer 3

Cyclical factors include affecting the trade balance:
- Business cycles both domestic and the world.
- Exchange rates
- Commodity prices/terms of trade
- Relative inflation.
Structural factors affecting the income balance:
- Investment savings gap
- Foreign investment
- Foreign liabilities