Essay about Fluctuations in External Stability

Words: 1626
Pages: 7
Open Document
Economics PAT

“Analyse the causes and effects of fluctuations in Australia’s external stability”.

Achieving external stability is an important objective of economic policy, achieving this stability ensures that imbalances in Australia’s economic relationships with other economies do not hinder achieving domestic economic policy goals such as lower rate of unemployment, higher rate of growth and lower inflation. There are three main factors that effect external stability the deficit on the current account (CAD), net foreign liabilities and the Australian dollar. Australia’s experienced times when overseas investors decided that the economy’s external position was unstable, and when investors like such decide to withdraw their …show more content…
If international financial markets loose confidence in Australia, our credit rating may be reduced which would lead to high interest rates and make funds from other countries a lot harder to obtain.

The main drive behind foreign equity has been foreign investment in minerals and resources sector, when investors buy assets within Australia its recorded as an increase in foreign equity, the problem with this is that foreign equity attracts servicing costs in the form of profits and dividends which are returned to overseas investors. Equity servicing costs account for around half of total primary income outflows. Whilst there are disadvantages with high levels of foreign ownership, the sustainability of equity servicing is of less concern then debt servicing because dividends are sent overseas when an Australian asset or business is generating a profitable return, while interest payments on debt must be paid regardless of whether there is a profit.

With foreign debt and equity levels another trend must be factored in which is the large rise in Australian investment overseas and the growth of other countries liabilities to Australia. In 2010-11 Australia’s level of foreign assets increased from $494 billion to $1,253 billion and ownership of equity overseas rose from $295 billion to $629 billion during this period, whilst our loans to overseas countries grew from $198 billion to $625 billion. These
Show More

Related Documents: Essay about Fluctuations in External Stability

External Indicators Affecting Australia's External Liability

External stability is a term used to describe a situation where external indicators are at levels at which they can remain in the long term without negative economic consequences. The three main external indicators affecting external stability are the current account deficit (CAD), the level of net foreign liabilities and stability of the exchange rate. Trends in these indicators are used by the government and the Reserve bank to help set macroeconomic policy and consider the need for microeconomic…

Words 960 - Pages 4

Global Factors Affecting Business Essay

business operations. These factors are classified into two broad categories. These are: a) External or Uncontrollable factors of Business environment. b) Internal or Controllable factors of Business environment. External Factors: The factors those are not…

Words 1024 - Pages 5

Essay Food Product Development Notes

Factors which impact on FPD External Factors (Macro Environment): There are a number of influences of FPD which are beyond the control of the industry, these are called external factors. The economic environment: - Economic activity usually fluctuates. The influences on the fluctuations are complex and several factors determine economic growth and stability. These are:  Exchange rates: A weak Australian dollar makes foreign exchange investment and export trade appealing. Primary produce and…

Words 1624 - Pages 7

South Korean Development Essay

during the World War II as their “rice basket” and being a “wall of democracy,” to ward off the communist threats during the cold war, the Korean peninsula has always been a crucial geopolitical pivot (Brzezinski, 1998) and was subjected to constant external monetary and technological inputs. Indeed, the sustained support from the world superpowers with no strings attached, especially from the United States and Japan, is exactly what third world countries would die for; but there always are a series…

Words 1685 - Pages 7

Essay on Kuwait Country Assesment

Nearly 50% Kuwait’s GDP comes from state owned oil exploration, production, and refining companies. Oil dependence has made Kuwait’s economic structure weak and severely undiversified, and lack of diversification leaves Kuwait highly vulnerable to fluctuations in global oil prices (Matabadal). Kuwait’s GDP is equivalent to 165.8 billion in U.S. Dollars and is growing at a rate of 2.3% as of 2013. Exports account for 68% of GDP while imports account for a negative 25% of GDP. Kuwait’s exports are primarily…

Words 1757 - Pages 8

Kelso Summary

interactions and coordination among different systems within the body is important as the interactions are responsible for generating specific patterns in a self-organized fashion. Additionally, Kelso believes that functional information, or any internal or external variable that is meaningful to the system, helps guide patterns to naturally emerge. Contrary to other theories, Kelso also believes that there is no specific agent within the system that is responsible for the organization…

Words 812 - Pages 4

Essay on Brazilian Investment Determinant Econometric

Investment Determinants in Brazil: An Econometric Analysis Capital formation occurs when a society does not devote its entire productive capacity to immediate consumption needs and rather devotes resources to the making of capital goods, such as factories, machines, and tools. Capital formation in turn increases society's total productive capacity in the long term. For Brazil, the last 30 years of fixed capital gross formation as a share of GDP has been volatile. In the 1970's it averaged 23%, in…

Words 1126 - Pages 5

Essay about Evaluate the Effectiveness of Australian Government Economic Policies in Achieving Their Objectives

achieving their objectives. The government implements an economic policy mix involving macroeconomic and microeconomic policy in order to achieve their objectives. The three main objectives include: • Internal stability – low inflation (price stability) and full employment • External stability – stable exchange rate, a sustainable level of foreign debt and the current account deficit (CAD)  • Economic growth Other government objectives include equal distribution of income and environmental management…

Words 1952 - Pages 8

Accounting Reporting Criteria (Gm and Toyota) Essay

The purpose of the Sarbanes-Oxley Act is to protect all internal and external stockholders. The passage of this act has influenced the accounting practices of other nations. However, the Sarbanes-Oxley Act in itself in a United States accounting practice and is not mandatory beyond international borders. Other nations have…

Words 1281 - Pages 6

Public Finance and Debt Federal Budget Essay

 Fiscal policy deliberate changes in gov't spending, taxes, or some combination of both to promote full employment, price level stability, and economic growth  What does fiscal policy require? increases in gov't spending decreases in taxes (or both) a budget deficit  What is the goal of fiscal policy? To increase aggregate demand and push an economy from a recession  What are appropriate fiscal policies to decrease aggregate…

Words 1094 - Pages 5