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Wednesday, July 24, 2013



EXTERNAL STABILITY Presentation Transcript:

2.Measures to assess external stability
“external stability” means a situation in which Australian economy is able to fulfill its international commitments.

3.Balance of Payments
Balance of payments (Bop) accounts are an accounting record of all monetary transactions between a country and the rest of the world.
These transactions include payments for the country's exports and imports of goods,services,financial capital and transfers.
The Bop accounts summarize international transactions for a specific period, usually a year, and are prepared in a single currency,

4.Balance of payments

5.Balance of payments(NFD)

6.1.Current A/c Deficit
Part of balance of payments.
Australia has been facing deficit as imports>exports
Another important reason being the high level of interest paid towards NFD.
Elements of Balance of current A/c
Credits-Debits+NFD=balance of current A/c

7.Net Foreign Debts
What is gross and net foreign debt?
Net Foreign Debt o/s=Payments-Receipts
Expressed as % of GDP or just as a raw figure.
Financial institutions have a huge role to play in creation of foreign debts.
NFD of Australia seems to grow every year-
Low saving rate
High investment
Dependence on global markets.

8.Difference in saving and investment

9.NFD  as % of GDP

10.Exchange Rates
Exchange rates are needed in order to have trade between different countries-receipt and payments
Exchange rates are fixed based on the market share the particular economy is holding in global trade.
It is the value of Australian dollar expressed as another currency.
For e.g.-
        1 AUD$=0.983 US$
        1 AUD$=Rs.53.45
Usually converted to US dollar
Traded Weighted Index also assess movements of the currency
Floatation of AUD in 1983-Dirty Float
Appreciation and Depreciation

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