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Australia's Balance Of Payments Essay

1059 words - 4 pages

•Balance of PaymentsDefinition-the record of the transactions between Australia and the rest of the world during a given period, consisting of the current account and the capital and financial account-it shows the trade and financial flows in an out of the Australian economy-these accounts are complied according to a set of international account standards, which makes it easier to compare Australia’s balance of payments with other countriesStructureCurrent Account-shows the money flow from all exports and imports of goods and services, income and current transfers for a period of one year-covers external transactions that are not reversible-net goods: the difference between what Australia receives for its exports and pays out for its imports-net services: refers to services that are bought and sold without people receiving a good-balance on goods and services: derived by adding net goods and services together-net income: difference between the income flows out of Australia and the income flows into Australia-net current transfers: occur when products or financial resources are provided without a specific good or service being provided in return-balance on current account: addition of the balance on goods and services, net income and net current transfersCapital and Financial Account-concerned with financial assets and liabilities- the money that flows that result from international borrowing, lending and purchases of assets for a period of one year-these transactions are reversible-capital account: consists of 3 main elements1.capital transfers- people migrating into or out of Australia2.capital transfers- foreign aid to assist other countries to build up their infrastructure or capital stock3.entries for the purchase and sale of non-produced, non-financial assets- mainly intellectual property rights (patents, copyrights, etc)-financial accounts: shows Australia’s transactions in foreign financial assets and liabilities and come under 5 categories1.direct investment- covers foreign financial transactions to fund new investment in Australia or overseas2.portfolio investment- refers to the buying of land, shares and other marketable securities in existing companies3.financial derivatives- category of complex financial assets that have become increasingly significant in recent years4.other investment- residual category that captures transactions not classified as direct investment, portfolio investment or reserve assets5.reserve assets- refer to those foreign financial assets that are available to and controlled by the central authorities for financing or regulating payment imbalances-balance on capital and financial account: determined by adding the categories together-balance of payments: the accounts added together must equal zeroTrends-Australia has experienced persistently large current account deficits since the mid 1980s-this means we have paid out considerably more for goods and services and other income and transfer payments...

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