Economics

Trade Flows and their definitions

Exports – the sale of goods and services from Australia

 

Imports – Australia’s purchase of goods and services

 

International Trade Flows – refer to the exchange in goods and services across national boundaries

Financial Flows And the their definitions

Debt Flows – loan, interest payments and then repayment of the loan

 

Equity Flows – foreign direct investment and portfolio such as the purchase and sale of assets including shares, dividend flows

 

Other – foreign aid, foreign workers sending money to Australia

Portfolio Investment

investment in owning less than 10% of company shares

Direct Investment

investment that involves implementing business in Australia such as Costco and/or owning more than 10% of company shares in Australia

Trade Types - Value (trade and financial)

Trade – what is the dollar amount of goods and services being traded in and out of Australia

 

Finance – what is the dollar amount of finance moving into and out of Australia

Trade Types - Composition (trade and financial)

Trade – what type of goods and services make up our imports and exports

 

Finance – what type of financial flows [direct or portfolio] coming into and out of Australia

Trade Types - Direction (trade and financial)

Trade – where are these goods and services going to and coming from

 

Finance – where is this finance going to and coming from

Australia’s Reliance on Commodity exports (positive and negative)

Positives – we can expect these to continue to grow given China and India and Asean economies expected growth so we have a reliable source of income

 

Negatives – Narrow export base makes us vulnerable to global trade conditions. Examples include; China and covid tariffs.

Intermediate Goods

Processed materials, components, or services that businesses buy and use up or transform during the production of other goods

What are Financial Flows?

any movements of money that are not associate with trade flows

Types of Financial Flows: Debt (Inbound and Outbound)

Inbound Flows (money coming in) – Receive loan money in, Receive interest on loans to foreigners, Receive loan repayments from foreigners.

 

Outbound Flows (money going out) – Lown money out, pay interest to foreigners on loans, repay loans to foreigners

Types of Financial Flows: Equity (Inbound and Outbound)

Inbound Flows – Money invested in Australia, received dividends on equity investments overseas, receive sale proceeds selling foreign investments

 

Outbound Flows – Invest money out, pay dividends to foreigners on investments in Australia, Send proceeds of sale by foreigners of Australian investments

Types of Financial Flows: Other (Inbound and Outbound)

Inbound Flows – receiving foreign aid, receive payments for IP (intellectual Property - refers to creations of the mind such as inventions, literary and artistic works, designs, symbols, names, and images used in commerce that are legally protected from unauthorized copying or use.)

 

Outbound Flows – paying foreign aid, Worker’s remittances

The Balance of Payments

summarise all transactions Australia has with the rest of the world over a given period of time. It shows the financial and trade flows in and out of the Australian economy

Credit

All money that flows in to Australia

Debit

all money that flows out of the Australian economy

The Current Account

shows all the money flow from all goods exported and imports of goods and services, income flows and non-market transfers for a period of one year. In effect, the current account covers external transactions that are not reversible (once commenced these transactions cannot be undone)

Net Goods

refers to the difference between what Australia receives for its goods exports and what is pays out for its imports of goods.

Net Services

refers to the difference between what Australia receives for its services exports and what is pays for services from overseas.

Balance on goods and services

BOGS is the amount that is derived by adding net goods and net services together (BOGS = NET GOODS + NET SERVICES)

Net Primary Income

refers to the earning on investment that is earned as a return from a factor of production.

Net Secondary Income

refers to non-market transfers that is, income not earned through a factor of production. These occur when products or funds are provided without a specific good or service in return.