Economics appreciating aus

what would happen if australia continually bought more imports and sold fewer exports?

A range of factors have been put forward to explain the relatively strong performance of the Australian economy over this period.

An appreciation of the Australian dollar will have the opposite effect — Australian produced goods and services will become more expensive compared to goods and services produced overseas. It is difficult to quantify the economic impact of maintaining the stability of the financial system during the GFC, but it was no doubt a key factor.

For example, if the Australian dollar depreciates, tourists visiting Australia will need to change less foreign currency to pay for their meals and hotel rooms in Australia.

Analyse the effects of changes in the value of the australian dollar on the australian economy.

Given the significant influx of foreigners coming to work or study in Australia in recent years, it seems highly likely that short-stay visitor movements may have added to the demand for housing. Without the net revenue it has received from migrants, the Australian government would have been forced to increase the cost of living or to reduce incomes possibly by raising taxes, possibly by not granting pay-rises to government staff, or possibly by offering less generous welfare and services. While demand from China provided considerable support the economy during this period, it was not the only factor, nor the main factor, underpinning the resilience of the Australian economy. Source: Treasury, IMF. Australia's greater exposure to the fast growing Asian region than other advanced economies has been cited as an important factor underpinning its strong performance during the crisis see Treasury And once a factory is shifted overseas, or a contract lost, it may be difficult to expand manufactures or other non-resource exports again even if, after the resources boom fades, the exchange rate appreciation is reversed. The increase in global demand owed to a large increase in demand for steel and energy, driven by rapid urbanisation and industrialisation in China and some other emerging economies. Even after prices adjust, it may take time for households and firms to adjust their spending patterns. Indeed, the saving rate had started to recover even before the financial crisis Stevens, ; Freestone et al. With most households and business loans in Australia being variable, monetary policy was rapidly translated to a change in household disposable income muted somewhat by many households choosing to maintain their regular repayments. There is little doubt that — taken as a whole — these reforms have contributed to the improved resilience of the Australian economy to external shocks see, for example, Gruen,

Chart 5: Relative price of exports of manufactures observation for relative price is Treasury estimate. There are also some industry-specific measures for manufacturers. In some cases, where there are clear benefits to the econ omy from specific government intervention, it may be appropriate to implement: measures to align the private and social benefits or costs of a given activity; measures to address market rigidities and transitional costs as resources move to alternative uses; and measures to improve information available to market participants.

Without the net revenue it has received from migrants, the Australian government would have been forced to increase the cost of living or to reduce incomes possibly by raising taxes, possibly by not granting pay-rises to government staff, or possibly by offering less generous welfare and services.

Lower inflation. Australia's fiscal space gave the Government room to allow the automatic stabilisers to act and to put in place a substantial discretionary stimulus, while still maintaining a strong fiscal position.

However, governments are no better placed than firms and investors, responding to signals in the market, to determine whether a shock is temporary. There was an extraordinary increase in the difference spread between the yields on short-term inter-bank instruments and the expected official cash rates, reflecting the collapse in confidence in the credit-worthiness of financial institutions and a huge increase in the perceived value of hoarding liquidity.

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Explainer: What a strong Australian dollar actually means