The Dynamics of Relationship Between Australia and USA
Added on 2020-04-01
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Running head: ECONOMIC ASSIGNMENTEconomic assignmentName of the StudentName of the UniversityAuthor note
1ECONOMIC ASSIGNMENTExecutive Summary The report aims at evaluating the dynamics of relationship between Australia and USA. Both the nationsare considered as developed nation and shared a strong international relationship. This leads to theassertion that growth or fluctuation in USA affects the Australian economy by causing expansion andcontraction of the economy. One rationale behind such claim is the relatively large of USA economy.This claim is evaluated considering historical data on some major macroeconomic indicators. The firstindicator considered is the real GDP. A comparative analysis is made on GDP movement. The analysisfurther goes on by focusing on variables such as FDI flows, interest rate movement, net export andmovement of the exchange rate. In GDP analysis, there are some common point of GDP movements.To closely evaluate the points FDI flows are considered and it is seen that USA makes major investmentin Australia and similarly Australia’s investment in USA is also significant. Trade volume between USAand Australia had increased continuously. One striking fact is the impact effect of USA recession onAustralian economy. Australia has escaped from the recession and mitigate the risk as minimum aspossible.
2ECONOMIC ASSIGNMENTTable of ContentsIntroduction.................................................................................................................................................3Defining economic relation; USA and Australia...........................................................................................3Dependency debate....................................................................................................................................3Real GDP Analysis; Australia and USA..........................................................................................................4Investment relation.....................................................................................................................................6Net export and exchange rate.....................................................................................................................7Great recession in USA and its impact on Australia...................................................................................10Conclusion.................................................................................................................................................10References.................................................................................................................................................11
3ECONOMIC ASSIGNMENTIntroduction In a globalized world, nations become increasingly interrelated with each other. Interactionamong nations is not only in terms of visible trade but also in terms of invisible trade that is trade ofservices. The relation becomes stronger when countries make investment in each other market, loangive abroad and capital repayment. The cross border transaction and hence international relationshipbecomes an integral part of globe. National generally benefitted from transaction take place oninternational platform. In the process, the dependency among nations increases especially for smallnations. The small here not only points to the geographical size but to the economic power. The greatereconomic power a country has, the more it has impact on other nations.One such economy having considerable global power is USA. The single nation has control overmany nations, comparatively small sized. USA and Australia are two nations sharing a strong economicrelation. They traded goods and services and invests significant amount on each other market. However,Australia is comparatively small size as compared to USA. For this reason, many commentators opinethat USA can have large impact on Australian economy. When real GDP in USA changes then there arepossibilities that is causes an expansion and contraction of Australian economy. Many related factorshere needs to be considered such as trend in et export, movement if exchange rate or interest rate. Thereport examines this assertion in light of economic theories and historical data. Defining economic relation; USA and Australia There are many large economic players impacting on global scenario through their fiscal,monetary and international monetary framework. United States of America and Australia are two suchnations that are two dominating player in the international world. Apart from their impact on othernations these two nations share political shared political and socio economic relation with each other.Goods and services are traded and there are both way flows of funds between nations. The internationalrelationship established between the nations went on stronger day by day signifying an economicdependence (Dowding and Martin 2017). USA ranks fourth in the list of Australia’s importers. Goodsfrom Australia overflow Australia market and contribute to job growth in Australia. In return, Australiaalso imported considerable amount of goods and services from USA. This shows the mutually beneficialtrade relation between the USA and Australia. The bilateral trade agreement between USA and Australiathat came into effect on 2005 strengthen the relationship between nations. USA always maintains apositive trade balance in trade with Australia. USA is second largest importer of Australia. The tradeagreement removes all the trade barriers such as tariff, quota and other restrictions. Therefore, all thehurdles of trade between nations eliminated further strengthening the trade relation. The FDI from USA to Australia has significant impact on Australia’s economy. The funds flowfrom Australia to abroad the largest share is acquired by USA. The productive investments positivelycontribute to growth and prosperity of both the nations. Australia has a favorable business environmentattracting foreign funds. US firms operate in Australia for over 100 years and generate jobs for manyAustralian (Mukulu, Hettihewa and Wright 2014). Dependency debate International trade relation and resulted dependency is an interesting area of research. Theabove section shoes relation between Australia and USA in Terms of visible and invisible trade andrelation and capital investment. The friendly relation between the nations is one reason for assuming
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