BOP PPT 3 Flashcards
How has Australia’s current account changed over the last 10 years?
It has fluctuated, shifting from deficits to surpluses.
How is the current account related to the financial account?
They are linked but opposite; changes in the financial account (e.g., foreign investment) affect the current account (e.g., dividends/interest).
How has the net goods balance changed from 2016 to 2023?
2016: $27.5M deficit → 2023: $151B surplus.
Why does the net goods account fluctuate?
Due to changes in export and import values.
Why does Australia’s services account usually have a deficit?
Due to high imports of travel and transport services.
Does Australia’s services account usually record a surplus or deficit?
A deficit.
Why is the net income balance always in deficit?
Due to high foreign investment into Australia, leading to large dividend and interest payments to foreign investors.
Is Australia’s net income balance usually in surplus or deficit?
Always in deficit.
Before 2019/20, how long did Australia have a current account deficit?
Over 40 years.
Why did Australia have a current account deficit for so long?
Outflows (debits) in the current account exceeded inflows (credits).
What was the primary reason for Australia’s historical current account deficit?
he Investment-Savings Gap.
What is the investment-savings gap?
gap between Australia’s low savings and high investment needs.
hy did Australia historically need high foreign investment?
Due to a small population and large infrastructure needs (e.g., mining industry).
How does foreign investment impact the current account?
It increases financial account inflows but also raises dividend/interest outflows, worsening the current account balance.
How did the savings-investment gap affect Australia after 2019?
: Savings increased while investment needs decreased.
Why did Australia’s need for foreign investment decrease after 2019?
Mining and energy infrastructure was already developed.
What allowed Australia to increase investment abroad after 2019?
Higher savings from the economic benefits of the mining boom.
