CHAPTER TWO Economics_Notes_George_Chung

CHAPTER TWO Economics_Notes_George_Chung - AUSTRALIA'S...

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A USTRALIA ' S P LACE IN THE G LOBAL E CONOMY $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ A USTRALIA ' S T RADE INANCIAL F LOWS $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ Value, Composition and Direction of Aust's Trade and Financial Flows Aust, as part of the global eco, is linked to other countries through trade. Changes in the overseas sector will have an impact on all other sectors within the Aust economy. Exports Pattern: Aust traditionally relied on rural products for its export income. In the 50s agricultural commodities such as wheat and wool were the main sources of Y. Over 80% of export Y was earned from agricultural products. In mid-80s this had fallen to 35%. By 1999- 2000 the importance of these products had declined to less than 26% of X income. Exports of minerals and fuels have assumed much greater importance: 3% in mid-50s, 38% in mid-80s, and 37% in 1999-2002. Manufactured items accounted for 11% of exports in the mid-50s, while they accounted for nearly 24% in 1999-2000. A major problem in relying on agricultural and mineral exports is the volatile world prices. Fluctuations in price can be extreme. Direction has also changed: In 50s most exports went to the UK and Europe, whereas today they are sent to Asia (particularly Japan) and N America. There was a continuous emphasis throughout the 1990s on improving our ties with Asian countries to benefit from the high growth rates occurring in the region. The Asian crisis in the late 90s had the potential to affect significantly the Aust economy, but Aust was able to expand its mkts in Europe and the USA. Imports Pattern: Traditionally, manufactured goods have been the major imports, and this remains so. Capital equipment has been the area of fastest growth and accounted for over 23% of all imports in 1999-2000. Unlike Aust's commodity exports, manufactured goods tend to maintain or increase their prices on the world mkt. Direction: The source of imports has changed from UK and Europe toward the USA and Asia. Japan in particular has assumed a very important position as a trading partner. Financial Flows Aust resource-rich country with a stable political climate always been able to attract high levels of foreign investment. Since the 1950s the source of investment, like trade, has increasingly changed from Britain to Japan and the USA. During 80s, borrowings from abroad were substantially greater than equity raising from abroad. Private capital outflows since easing of restrictions in the mid-80s have grown consistently. During 90s they were equal to half private capital inflow and 3% of GDP. Despite growth in capital outflow, foreign investment in Aust grew to 2.5 times the value of Aust investment overseas during the same period. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ A
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CHAPTER TWO Economics_Notes_George_Chung - AUSTRALIA'S...

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