Topic 2 – Australia’s Place in the Global Economy

Resource Description

Australis’s Trade and Financial Flows
Value, composition and direction of Australia’s trade and financial flows

• trends in Australia’s trade pattern
  International Trade Flows – refer to the exchange of g&s across national boundaries
  – International finance and investment (include debt and equity borrowings, foreign exchange
  and derivatives trading) can be;
• Portfolio Investment – purchase of financial securities ie. Bonds and shares
• Direct Investment – established companies purchase facilities in other companies ie. Subsidiaries

– International Trade is characterised by;

• Trade-in more than one national currency ie, USD and AUD
• Involves risks such as commodity prices, changes in market demand or govt. eco policy
• Normally dominated by the role of MNCs as they have enormous power and influence in affecting trade and investment

The link between Internationalisation and Globalisation
– Australia became more internationalised and integrated through govt. policy changes
– In 1983, the Australian financial system was deregulated, and exchange rate was floated (able to fluctuate)
– Deregulation allowed firms to access world markets and reduced the cost of exporting however, also increased the volatility of the exchange rate (due to changes in Australian trade)
– 1980’s – 00’s govt reduced levels of protection (tariffs, quotas and subsidies) thus encouraging Aussie’s to export
– Aust. Govt. participated in Intl. trade forums (eg, Cairns Group of Countries) to secure better
market access for Aust. Agricultural exports
– Australia and other APEC countries signed the “Bogar Declaration” to reduce trade barriers
between them al by 2020
– The rise of eCommerce and ICT transformed the economy to a more liberalised economy increasing in EI
– “Global Resource Boom” increased china’s demand for resources especially in agriculture
and materials

Trends in the Value and Composition of Aust. Trade Patterns
– imports and exports increased internationalisation for Aust. The economy as they rose from 12%
of total GDP to 21% (2018)
– the 26% rise in mining exports helped the value of exporting goods rise from 18% > 26.5%
– Australia recorded a large surplus of $53,912m in the goods balance (exports exceeded
imports)
– Exports such as mining and manufactured goods allow the sustainable export income for the
Aust. Economy

– Strong service exports from Australia (freight, transport and communications) due to the
stronger global growth the lower exchange rate dropping thus causing competitiveness
– Australian imports from other countries grew especially in consumption, intermediate goods
and capital goods