BOP

Question 1

Balance of payments

Answer 1

-set of accounts that record financial flows between Australia and the rest of the world
Records: trade (payments of x/m) and income (interest, dividends, profits, remittances)

Question 2

Current account (CA)

Answer 2

-records trasactions associated with trade + income
Sub accounts :
-goods
-services
-Primary income ( wages and return form inv)
-secondary income (transfers, foreign aid)

Question 3

Capital financial account (KAFA)

Answer 3

-records transaction associated with investment
-sub accounts:
-capital (sale of ideas or copyright)
-direct inv (more than 10% ownership)
-portfolio inv (less than 10%)
-reserve
-other investment
-errors and omissions

Question 4

CA goods trend

Answer 4

-last 10 yrs small deficit
-currently small surplus
-60% resources
-positive trend

Question 5

CA primary income trends

Answer 5

-last 10 yrs large deficit
-Aus has always had high FI meaning high levels of income outflows

Question 6

Current account trends

Answer 6

-CAD roughly 4%
-high levels of direct investment meaning high income deficit
-high levels of imports

Question 7

Aus bop trends

Answer 7

-CAS roughly 1-35 gdp
-increase in exporting recourses
-decrease in importing of services
-decrease in income outflows from investment

Question 8

Aus savings investment gap

Answer 8

-typical CAD due to gap- meaning our savings each yr insufficient to fund investment needs, so foreign investment needed to fil resulting gap
-foreign investment benefits our economy because all entrepreneurs and companies have the funds they need maximising growth
-leads to income deficit (roughly 3% GDP)
-2019-2023 CAS
-our total savings was enough to fund all of our investment needs so our excess savings invested overseas meaning income credits
-SI- gap closed bc less investments as mining boom ended
-3 decades of super fund growing, increased saving

Question 9

Commodity prices

Answer 9

—over last 10 yrs commodity prices have had increasing trend due to global shortages
-60% of Aus exports are commodities so a higher price means larger credits, and an increased trade balance
-current war in Ukraine contributing to this- global shortages

Question 10

Factors effecting trade balance

Answer 10

Commodity prices
Global business cycle (if trade partners are in the expansion phase then employment and long term growth will increase so demand will increase)

Question 11

Factors effecting net income balance

Answer 11

-9savings investment gap
-Aus business cycle (during expansion phase there will be increased investment to capitalise on growth meaning increased interest outflows and vice versa)