Australia 's Current Economic Climate

Australia became a commonwealth of the British Empire in 1901. It was able to take advantage of its natural resources to rapidly develop its agricultural and manufacturing industries and to make a major contribution to the British effort in World Wars I and II. Now, Australia has a prosperous Western-style capitalist economy, with a per capita GDP at the level of the four dominant West European economies. Rich in natural resources, Australia is a major exporter of agricultural products, minerals, metals, and fossil fuels.

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

Australia’s lack of international competitiveness as a result of geographical location and small population, as well as the decline of the manufacturing industry to overseas low cost producers, with the problem being further increased by the high AUD exchange rate, as a result of the mining boom. The fall in domestic production has led to an increase in imports and a fall in productive innovation compared to advanced economies has led to a rise in CAD.

Canada’s economy has to face many issues. One of these being the rate of exchange. The canadian dollar has been going up and down constantly throughout many years. “The first paper money issued in Canada nominated in dollars were British Army notes, issued through 1813, The Bank of Canada was created in 1934 and given responsibility, through an Act of Parliament.” Much has happened to the dollar throughout the years; the economy always varied depending on the dollar worth because it has always played a major role on the economy. Pertaining to the issues of the exchange rate, I will discuss two main ways of it and how it plays a big role on the economy in present times.

The Australian economy marks external stability as an important objective because it can influence other important aims such as economic growth, unemployment and inflation. External stability is the concept of sustaining a nation’s external accounts so that in the future, it is able to service its foreign liabilities and can avoid currency volatility. When looking at external stability, we must examine Australia’s balance of payments, which records all economic transactions between Australia and the rest of the world. Australia’s balance of payments has two components, which is the current account and the capital and financial account. The current account measures the receipts and payments for trade in goods and services, transfer payments and income flows, while the capital and financial account shows international borrowing, lending, purchasing and sales of assets.

Changes in exchange rates are the result of changes in demand and supply factors for goods and services, such as changes in tastes, relative incomes, and relative prices. Under a flexible-rate policy, all domestic prices are linked with foreign prices. Any change in the exchange rate automatically alters the prices of all foreign goods to domestic goods. The price change alters the relative attractiveness of imports and exports and maintains equilibrium in each trading partner's balance of

The Australian economy has experienced large changes in the structure of what it produces and how. These have been caused by technological change; by fuller integration into world markets, along with the rise of competition from lower wage countries in the production of manufactured goods (and increasingly, services); and by changes in the pattern of consumption as real incomes rise. The sustained loss of jobs in the production of goods has lead to a major decline in job opportunities for men who have only modest levels of formal education. But it is also evident in the withdrawal from the workforce altogether of such men. In contrast, the expanding areas of the economy have been particularly likely to employ women, whose share of paid work has been rising steadily (especially for married women and women with dependent children).

Australia imports generously a larger number of merchandise and administrations from the USA than it fares to it. As shown in source B1, exports to the US are 15,533 million AUD, compared to the 39,181 million AUD that is imported from America. Australia’s exchange deficiency with the USA has enhanced marginally since 1998, from a top of $14.2b in that year, to $12.5b in 2003. It was at its most minimal in 2011 at $10.7b, when the $A conversion standard was least against the $US. Somewhere around 2010 and 2012 Australia 's fares to the USA were worth over $16.2b every year, except they tumbled to $14.2b in 2013. The USA got 10% of Australia 's aggregate fares in 2013, down from 12% in 2010. The USA 's relative significance to Australia as a wellspring of imports has declined relentlessly in the course of recent years (down from 22% of aggregate imports in 1998

It is said that the Australian economy was picking up in the March quarter in 2015, although the growth rate of the economy is still below the average over the past year. And there were some early indications that the strength of growing in the June quarter was not as strong as in the March quarter (Rba.gov.au 2015). Different kinds of macroeconomic indicators construct a picture of current macroeconomic conditions in Australia. There are a great number of macroeconomic indicators, three of the most important indicators will be focused as following, such as gross domestic product, consumer price index and labor force.

Like the other currencies mentioned in the report, the Japanese Yen (¥) also adopts a floating exchange rate. As this is a short term forecast of the Australian Dollar (AUD) against the Japanese Yen (JPY), a chartist approach will be taken to analyse the movements of the two currencies. The technical method and the effects of the government are the topics that will be analysed for this short run forecast (Moffett et al, 2006 p.136). As of the 1st of September 2010 the Australian Dollar $1 = Y75.93.

Value of Commodity and the Terms of Trade - The prices you get for your exports differing with the cost you pay for imports. Variances in item price and the terms of trade are central point that have affected the value of the Australian dollar over its past. Australia to a great extend is exporting nation and traditionally has generally disappearing exchange and in such manner waning trade rates over the decades. The currency will only rise if the prices improve.

?The increased importance being attached to exchange rates is a result of the globalisation of modern business, the continuing growth in world trade relative to national economies, the trend towards economic integration and the rapid pace of change in the technology of money transfer.? (Copeland, Laurence S. 2014). In 21th July 2005, Chinese authority announced that the exchange rate system changed, from the dollar peg to the floating basket peg system. Recently, since the volatility in the forex market is growing, which makes there is increase concern about forecasting of exchange rate movements. (Schnabl, 2008).

Exchange Rates. NZ has a floating exchange rate. The price of NZ’s currency in terms of other currencies is determined by the market forces. At present it is appreciating and is estimated to be at US$0.75 in 12 months’ time. Our dollar is now a prominent trading currency largely because of the sound performance of our economy and our stable political situation. An increase in the value of our dollar has a downward effect on export and import price levels. This is significant since when we buy goods or services from overseas we pay them in their currency. Perhaps this healthy exchange rate might discourage overseas visits to NZ for tourism and education purposes, but there is no clear evidence in support of this.

Exchange rate represents the external value of a currency. Changes in exchange rates may affect the relative position of a country in the international trade. Politicians and economists concern about exchange rate variability for lots of reasons, among which that the exchange rate variability discourages trade comes first. However, a large empirical literature on this issue does not confirm a significant effect of exchange rate on the volume of trade [1]. Instead other variables such as employment should be much more important from a practical point of view, for it is closely related to people’s livelihood.

Exchange rates fluctuated as countries widely used “predatory” depreciations of their currencies as a means of gaining advantage in the world export market. Attempts were made to restore the gold standard, but participants lacked the political will to “follow the rules of the game”. The result for international trade and investment was profoundly detrimental.