Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.
Introduction
Over the last few years, the Australian economy has performing poorly. This is despite of the policy makers’ efforts to maintain a highly performing economy. Due to poor performance, many activities in this economy have deteriorated.
When an economy is performing poorly, the government is unable to provide public services effectively. The level of unemployment also goes up (Mankiw 2011). Therefore, this condition poses a major issue in Australian economy.
There has been an increase in the financial obligations owed to non residents by the country. High financial obligations of an organisation to the non-residents contribute to an increase in the external liabilities levels (Stern 2007). There has also been an increase on the real assets in the country that are owned by non-residents. These are the main reasons why there has been an increase in the external liabilities in Australia.
Due to the increase in the level of external liabilities, more cash is flowing from the Australian Economy to other economies. As more income out flow, the balance of payment of the country deteriorates i.e. it will be moved towards the deficit.
Discussion
There are several factors that have led to the poor results in the Australian economy. One of the main factors, which have significantly contributed to this problem in the country, is external liabilities. Australia has a significant level of external liabilities. These have failed over the previous years. This has threatened the performances of the economy. It has led to poor performance of this economy.
In most cases, the global crisis adversely affects the economies with huge external liabilities (Stern 2007). Australian economy has been adversely affected by recession due to large external liabilities. Due to large external liabilities, the economy slows down as a result of recession. In other words, many economic activities are adversely affected by recession when an economy has large external liabilities.
The countries with large external liabilities in most cases have a tendency to have more depreciated exchange rates (Arnold 2010). On the other hand, countries with net foreign assets tend to have more appreciated exchange rates.
Having significantly higher levels of external liabilities, the Australian exchange rates depreciate. It therefore becomes expensive for the country to import from other countries. For instance, it becomes expensive to import technology and other capital goods that may be useful in production. This can adversely affect the total GDP in the economy.
Balance of payment accounts and the International investment position.
From the above statistics, it is clear that the economic conditions in Australia has been facing difficulties in 2010/2011 economic years. For instance, the current account has been running at a deficit. The balance of current account was -8 829 on June 2011 (Australian Bureau of Statistics 2011).
The above statistics reveals that there are negative net transactions between the Australian economy and other economies. However, Australia’s international debt level has been decreasing over the recent past.
Conclusion
This discussion has clearly shown that high levels of external liabilities have adversely affected the Australian economy. More income is flowing from the economy to other economies at a higher rate than inflows. As a result, there is depreciation of the foreign exchange.
This makes it expensive for the country to import from other economies. The economy also becomes more prone to effects of recession when it has large external deficits.
Reference List
Australian Bureau of Statistics. 2011 Balance Of Payments and International Investment Position, Australia. Web.
Arnold, R.A. 2010. Macroeconomics. New York, Cengage Learning.
Mankiw, N.G. 2011. Principles of Macroeconomics. Mason, OH, Cengage Learning.
Stern, R.M. 2007. Balance Of Payments: Theory & Economic Policy. U.S.A., Transaction Publishers.
Do you need this or any other assignment done for you from scratch?
We have qualified writers to help you.
We assure you a quality paper that is 100% free from plagiarism and AI.
You can choose either format of your choice ( Apa, Mla, Havard, Chicago, or any other)
NB: We do not resell your papers. Upon ordering, we do an original paper exclusively for you.
NB: All your data is kept safe from the public.