External Stability

External stability – stable exchange rate, a sustainable level of foreign debt and the current account deficit (CAD) 

Although Australia remains geographically isolated from the world, international trade still remains a main factor that allows Australia’s economy to prosper. Australia’s long history of trade has created tight links and connections with other nations. Being a member of many worldwide organisations, Australia has produced many free trade agreements with countries around the world. However, recently Australia has seen a change in the composition and direction of its trade and has developed a strong trade link with the Asia-Pacific Region.

Another major aspect this limb deals with is that of Australia’s relationship with the United Nations and other major international organisations .

In the long term the increase of foreign debt can lead to a debt sustainability problem, if Australia becomes overwhelmed with debt the economy will find it hard to service current debts. If the size of the debt is rising faster then the increase of GDP the interest payments on the debt will progressively

There are numerous reasons for the sudden decline in value of Australian currency, one of which is the renewed strength of the US dollar, due to the American economy’s acceleration through its recovery. However, there is the additional fact that the RBA has been cutting interest rates, resulting in Australia becoming a less attractive place for investors, as well as the continual impacts of deteriorating commodity prices

The spread of globalisation especially since 1990 has introduced many new elements into the financial markets and what determines the value of a nation 's exchange rate. This does not just apply to Australia, but as we saw in the later half of the 1990 's, to many other nations in the world. Firstly, trade in goods and services makes up a much smaller proportion of the demand and supply for currency. In the world economy, payments for international trade only account for about 1% of foreign exchange transactions. The total foreign exchange requirements for exporting and importing of goods and services in Australia is less than 3% of the total use of the foreign exchange turnover in Australian dollars (Reserve Bank Bulletin, Table F7 and Australian National Accounts, 5206.0). The main purpose for foreign exchange trading is international financial transfers of

However, the domestic sphere is vital to Australian policy and must be engaged to improve relations with Indonesia. A 2013 survey of the Australian public commissioned by DFAT in 2013 found that 53% of Australian believe Indonesia is not a democracy and 54% believe Australia is right to worry about Indonesia as a military threat (Roberts and Habir 2015: 205). This is worrying as domestic support does effect on Australian foreign policy (Stephens and Gruber 2010: 38) Australian generosity, diplomacy and funding have been the most successful method of deepening relations

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.

Australia and Australians naturally pursue to advance and maintain the security, economic prosperity and advocate our liberal democratic values by committing and showcasing them internationally. These three aspects are crucial and considered Australia’s key national interests due to their importance and essential benefits. Defence can support and aid us in recovery when we face unpredictable events of adversity. Our liberal democracy demonstrates a strong belief and core system which allows Australians to have political and economic freedom whilst having an approach to international affairs. Australia’s liberal democracy is also strongly linked to and requires a stable and resourceful economy in order for it to function. This enables

Providing aid to developing countries in the Asia-Pacific region allows the countries to develop politically and economically, helping the region prosper, and therefore improve Australia’s personal security. The aid provided by Australia helps developing countries to stabilise their situation

The overall effects and impact of globalisation on Australia may well be positive to the general population, but there will always be

Asia Pacific Economic Cooperation (APEC) is the pre-eminent economic rally in Australia’s region. APEC’s goal is to drive an extensive trade and investment liberalisation and facilitation agenda. It is focused on structural reform as a means of raising competitiveness and the efficiency of trade and investment flows. It has helped Australia with building and strengthening ties with other countries such as Brunei, Singapore, Philippines and other countries in the region. In 2009, 70% of Australia’s trade is with APEC countries.

The second key national interest of Australia is the economy. Australia’s capital, jobs, standards of living, technological innovations and social advances rely substantially on exports and commodity values within Southeast Asia and the Pacific (Department of Foreign Affairs and Trade 2016a). The stability of South East Asia and the Oceania

In this way, the government is able to maintain the balance of the budget, which is one of the factors of economic stability.

Countries with high openness level can fix their exchange rates and establish OCA to balance external payments. McKinnon believes that openness influences the choice of exchange rate regime. Real depreciation in a high economic open country will lead to inflation, the