Trade And Financial Flows Flashcards
Topic 2 (20 cards)
Define Balance of Payments
The BOP is a record of all transactions Australia has with the rest of the world and as such is the single greatest indicator of economic relations with the global economy
Differentiate Credit and Debit
Credit = Inflow Debit = Outflow
Main feature of the floating exchange rate
CA + KA = 0
List the Headings in the Current Account
- Balance of Goods and Services (Net Goods and Services)
- Net Primary Income
- Net Secondary Income
List the Headings in the Capital Account
- Capital Account - Capital Transfers + Non-produced/Non-financial assets
- Financial Account - D/P/F/R/O
Main Causes of CAD
- Low National Savings
- Trade Deficit
- Domestic Business Cycle
- International Business Cycle
- International Interest Rates
- Domestic Interest Rates
- Inflation
Effects of CAD
- Decrease investor Confidence
- Decreased Credit Rating
- Debt Trap Scenario
- Depreciation of AUD
Define Trade Weighted Index
The weighted average against a basket of currencies
Types of Exchange Rates
- Fixed (Up until 1976)
- Pegged ( 1976-1983)
- Floating (1983 +)
Terms of Trade
Export Price/Import Price
Factors affecting DEMAND of AUD
- Size of Financial Flows
- Expectation/Speculation
- Demand for Australian Exports
- Tourists
Factors affecting SUPPLY of AUD
- Financial Flows
- Expectation/Speculation
- Demand for foreign imports
- Tourists
Methods of RBA Intervention in FOREX
- Dirtying the Float
- Monetary Policy
- Inflation/International Competitiveness
- Terms of Trade
Positives of Appreciation of AUD
- Valuation Effect
- Decreases foreign liabilities
- Inflationary pressure reduced
- Increase consumer purchasing power
Negatives of Appreciation of AUD
- Export income deteriorates
- Reduced International Competitiveness
- Import spending encouraged
- Reduced Economic Growth
- Valuation Effect
Positives of Depreciation of AUD
- Increased International Competitiveness
- Import Prices increase
- Increase value of foreign income
- Valuation Effect
Negatives of Depreciation of AUD
- Reduced purchasing power
- Valuation Effect
- Inflationary pressures increase
Examples of Multilateral Agreements
- EU
- NAFTA
- APEC
- ASEAN
- AANZFTA
Examples of Bilateral Agreements
- CERTA (NZ-AUS)
- SAFTA (S - A)
- AUSFTA
- CHAFTA
STATS
STATS
