Australia : Balance of Payments Analysis

* Table of Contents

1. Introduction 3

1.1. Exports 3

1.2. Taxation and Interest Rates 3

1.3. Balance of Payment Trends 4

2. Data Collection 5

2.1. Economic Data, Australia 2000-2011 5

2.2. Current Account, 2005-2010 7

2.3. Capital Account, 2008-2011 8

2.4. Composition of Exports, Australia 2005-2010 9

2.5. Historical exchange rates between Australian Dollar (AUD) to US Dollar (USD) 10

2.6. Base Interest Rates set by the Reserve Bank of Australia 11

3. Analysis 12

4. Solving Current Balance of Payment Problems 13

4.1. Recommendations 13

4.1.1. Macroeconomic Polices 13

4.1.2. Microeconomic Policies 14

5. Conclusion 14

6. References 15

Introduction

The economy of Australia is a developed, modern economy of with a Gross Domestic Product(GDP) of US $1.23 trillion and in 2011, is the 13th largest economy in the world. The economy, dominated by its services sector accounts for 71.2% of its GDP, its industry sector accounts for 24.8% while agriculture only 4% (2010 est)(CIA Factbook, 2011).

Exports

Rich in natural resources, Australia focuses on exporting commodities rather than manufactured products and benefited greatly from the global commodities boom in the 2000s. Even though Australia is a services driven economy, its exports in mining and agriculture (10% of GDP) make up for 57% of its national exports. Between the period of 2006-2007, mining exports grew by 8% at the expense of its manufacturing industry which experiences a slow due partly due to the surging Australian dollar.

Taxation and Interest Rates

Australia collects the highest tax revenue as a percentage of its GDP among its fellow members in the Organization for Economic Co-operation and Development (OECD). Despite this, the country suffers from a fiscal deficit with Treasurer of Australia, Wayne Swan has forecasted a deficit of 3-5% of GDP between 2009-2013 (Parliament of Australia, 2009).

Interest rates in Australia have been...