We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Nobody downloaded yet

Australia: Terms of Trade - Essay Example

Comments (0)
Summary
Discuss the reasons for the main movements in Australia’s terms of trade over the last decade The terms of trade mean the quantity of imports, which are buyable via sale of a quantity of exports that is fixed. Improvements in a country’s TOT are positive for the country since it can buy more for a given export level…
Download full paper
GRAB THE BEST PAPER
Australia: Terms of Trade
Read TextPreview

Extract of sample
Australia: Terms of Trade

Download file to see previous pages... The TOT is influenced by the rate of exchange since a rise in the currency value of a country, brings its import domestic prices down but has no direct effect on the produced commodities for exports. The TOT is calculated using the formula; TOT= 100 x Average export price index/average import price index. If the export prices rise at a faster rate than prices of imports, then the TOT index rises, meaning less exports will be given up for a specific volume of imports. If the prices of imports rise at a faster rate compared to those of exports, TOT have deteriorated, and a larger export volume has to be sold in order to finance the importation of a given amount of services and goods. The TOT fluctuates according to changes in the prices of imports and exports with inflation and exchange rates influencing the direction of the TOT change. The graph below shows the Tot for Australia between 2002 and 2012; .  (Windsor Brokers, 2013: p1) The last month has seen a slow down in a trend that has been growing in the long term. This, however, is an anomaly rather than a trend. Central China has acted in favor of prosperity for Australia. Both TOT aspects in the exportation to China of coal and iron ore, as well as the importation of cheap Chinese goods, have influenced the TOT to a record positive level (International Monetary Fund, 2012: p43). The RBA refers to this as positive TOT shock, which is but one type of shock that is identifiable. Other shocks that can explain these are globalization shock, commodity-market specific shock, and world demand shock. A world demand shock that is positive is connected to an improvement in economic activity around the world coupled to an increase in import and export prices. Positive commodity-market specific shock improves prices of exports sans any corresponding improvement in economic activity around the world. Globalization shock, on the other hand, captures increasing emerging economy integration, especially that of India and China, into the global economy (International Monetary Fund, 2012: p44). An increase in globalization has been connected to a fall in relative prices for manufactured products. As imports from Australia are concentrated on manufactured products, this is expected to increase TOT. As more countries are integrated into the world economy, the demand increases for raw materials that exert a pressure export prices, which is associated with world output expansion. Global output has expanded over the past ten years, especially with China growing its economy by 8% for the tenth consecutive year (International Monetary Fund, 2012: p56). Additionally, global shock after manufacturing became globalized led to a reduction in the manufactured product prices, as well as a boost in raw material demand. This is what has seen the rise of the TOT for Australia in the last ten years. What could be the likely impact of a decline in the terms of trade on the Australian Economy? Analyze the impact on the macroeconomic variables in Australia, making use of the Mundell-Fleming model A decline in the TOT means that export prices fall in relation to imports. A decline in the TOT for Australia would lead to lower standards of living and a decreased importation ability. In the case of Australia, with its exportation of raw materials such as iron ore and coal and the importation of manufactured goods, a decline in TOT will result in Australia seeing the price of Iron ore falling in relation to that of manufactured products (Organisation for Economic Co-operation and Development, 2010: p135). This means that Australia will have to export moire iron ore and coal in order to get a similar ...Download file to see next pagesRead More
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Examine the reasons and implications of the decline of trade unions in Australia
The causes of such rapid decline are multifaceted and complex and have resulted in a plethora of literature debating such issues (Waddoup, 2005; Burgess, Mitchell & Preston, 2003; Peetz, 1998). Some of the factors evident for the decline include changes in workforce practices, increasing market competition, escalating inequalities, new and ever progressing technologies and globalisation.
5 Pages(1250 words)Essay
Why does the trade union movement, overall, in Australia, support the Labor Party
This paper is intended, first, to examine the trade union density, i.e. the proportion of the workforce in Australia, involved with a trade union; and second, to give a detailed account of the downward trend in membership, which has taken place since 1996, considering the acceleration in this decline during the 1990s, as well as the international nature of the phenomenon.
11 Pages(2750 words)Essay
Explain the bilateral trade flow between China and Australia through the traditional and modern trade theories
BILATERAL TRADE FLOW BETWEEN CHINA AND AUSTRALIA THROUGH TRADITIONAL AND MODERN TRADE THEORIES. The country of China is one of the biggest and stands at third position among the countries of the world. The population of China is largest of all. The country has gone through a number of crucial events but the enthusiastic and painstaking people of this country never gave up their determination in being the fastest growing economy in the world.
13 Pages(3250 words)Essay
Australian TOT(Terms of trade)
Terms of trade abbreviated as TOT is defined as the value of exports of a country relative to the value of its imports. It is determined or calculated by dividing the exports value by the imports value and then multiplying the result by 100. When the TOT of a country is below the 100% mark, the value indicates that there is increased capital going out to purchase imports that the capital coming in.
5 Pages(1250 words)Essay
Market Report on Australia
Fiscal and monetary policy options 8 2.5. Corporate earnings and industrial sectors to watch out for 9 2.6. Risks 9 3. Conclusion: Effects on financial markets 10 Reference List 11 1. Summary Australia has a stable financial system and a strong economic position in the world.
8 Pages(2000 words)Essay
How does an Australian company benefit from China entry into the WTO and the Free Trade Agreement between Australia and China a legal point of view
Even though China argued for the special right entitled to the developing countries, China stands in a class of its own, as it has made its own cozy
16 Pages(4000 words)Essay
Australia
English is the predominant language in Australia, and the country practices Westminster governance system. When it comes to religion, Christianity is more dominant in the country. There is a variety of sports that have grown popularity in Australia; these are rugby and
1 Pages(250 words)Essay
While the Budget factored in a decline in Australias terms of trade, the fall in global commodity prices over recent months has been larger than anticipated
The terms of trade can be regarded as the important economic measure. It can be defined as the ratio of prices of exports to prices of imports. The terms
6 Pages(1500 words)Essay
Australia
Just like the United States, the White skinned inhabitants of Australia who are the posted people for who an Australian is are not the original settlers in the land. While the Americans had to deal with the Native Americans
5 Pages(1250 words)Essay
Terms
An employee may allege that one of his colleagues sent an offensive email to the management. It can either be a true allegation or false. It should be investigated to find
1 Pages(250 words)Essay
Let us find you another Essay on topic Australia: Terms of Trade for FREE!
Contact us:
+16312120006
Contact Us Now
FREE Mobile Apps:
  • About StudentShare
  • Testimonials
  • FAQ
  • Blog
  • Free Essays
  • New Essays
  • Essays
  • The Newest Essay Topics
  • Index samples by all dates
Join us:
Contact Us