Economics 3.6

Depreciation of the AUD and inflation

It increases cost inflation (imports more expensive) and possibly demand inflation (exports cheaper, demand rises).

Appreciation of the AUD and inflation

It reduces inflation by making imported goods and services cheaper.

Depreciation of the AUD and economic growth

It boosts economic growth by making exports more competitive and reducing imports, increasing aggregate demand (AD).

Appreciation of the AUD and economic growth

It slows growth by reducing export competitiveness and increasing imports, decreasing AD.

Depreciation of the AUD and employment

It increases employment by lifting export demand, encouraging production and job creation.

Appreciation of the AUD and employment

It may cause job losses in export sectors but benefit jobs in import-based industries.

Depreciation of the AUD and living standards

Mixed effects: May improve standards via more jobs/income, or harm them if inflation rises.

Appreciation of the AUD and living standards

Improves material living standards (cheaper imports), but may harm overall standards if unemployment rises.

Depreciation of the AUD and Current Account Balance (CAB)

Improves the CAB by boosting exports and discouraging imports.

Appreciation of the AUD and Current Account Balance (CAB)

Weakens the CAB by reducing export demand and increasing imports.