Detailed Analysis of the Australian Financial Market and Economy

This report provides an overview of the Australian financial market, focusing on the Australian dollar, economic stability, and key regulatory bodies. It explores the currency's role, factors influencing its value, and the country's economic standing, including its credit rating and debt levels. The report discusses the Australian derivatives exchange, market regulations enforced by the Council of Financial Regulators (CRF), and the roles of other regulatory bodies like the Australian Securities Exchange (ASIC) and the Australian Prudential Regulation Authority (APRA). It also examines the impact of demand and supply on fund flow within the market and how regulatory bodies maintain balance. The report references key literature to support its analysis, offering insights into the dynamics of the Australian financial system.

Australian Market 1
AUSTRALIAN MARKET
By Students Name
Code + Course
Professor
City, State
Date

Australian Market 2
Australian Financial System
The main currency used in Australia is the Australian dollar (AUD) it was introduced in
February 14th, 1966 and is used in the three Pacific Islands of Tuvalu, Nauru, and Kiribati apart
from Australia. It is used as the main universal medium of exchange apart from the US dollar.
Currencies appreciate and depreciate basing on demand and supply. When demand slows the
price of resources in the country depreciates, and as a result, the Australian dollar falls in value
since its demand is reduced. When the demand for Australian goods goes up, it causes a rise in
the prices of goods, and as a result, the Australian dollar appreciates due to increased demand
(Elliston, 2012). Australia is one of the worlds stable economies classified among the
industrialized countries in the world. It has always maintained a very good credit rating. As in
2016, Australia had a AAA rating.
The Australian Dollar has ranked high in traded being the 5th most used in 2016 just
below the Us dollar, Japanese Yen, European’s euro and the sterling pound of the United
Kingdom. The stability is associated with comparatively high-interest rates and freedom in the
Australian market relative to other markets (Humphrey, 2011). Economic stability and political
system stability, as well as diversification available in the portfolio of currencies contained in the
Australian market, makes the Australian Dollar a currency of everybody’s choice. Australia’s net
debt has been low compared to the debts of other industrialized countries. In 2016 the net
percentage debt as a percentage to GDP was 18.9% (326.0) million lower than other
industrialized countries. However, the debt level in Australia has been on the rise. The debt was
as low as 9.6% of GDP in 2007 but has grown to 33.8% of GDP in 2018.
The increase in debts has been a result of a government project, but the amount varies
from week to week depending on the government’s projects and bonds (Humphrey, 2011). The

Australian Market 3
Australian Derivatives exchange was launched on 1st January 2001 but closed due to a breach of
financial regulations and covenant. However, the Sydney Futures exchange markets control close
to 30% of the market offering future contracts for three month-interest rates on futures, five-year
on government and equity index contracts.
The Council of Financial Regulators (CRF) contributes to effectiveness and efficiency in
the Australian market through regulation of financial activities in the security market. This
regulation promotes stability in the economy and market. Being able to regulate the many
players ensures that the players compete freely and fairly in the market (Elliston, 2012). The
other players in the Australian finance market the other players are Australian Securities
exchange (ASIC), the Australian Prudential Regulatory Authority (APRA) with the treasury to
regulate aspects of the market. The bodies ensure that the economy is stabilized through
variation of bonds and other deposits.
The flow of funds is always subject to demand and supply. When the demand is high, the
funds circulate freely in the economy. When demand is low most of the funds are kept in
government reserves. The market is the main determinant of demand and supply. The regulatory
body CRF, however, ensures that money held is regulated ensuring that the balance between
demand and supply is maintained (Humphrey, 2011). This role ensures that market forces of
demand and supply are at balance. Where there is excess money circulating in the economy, the
regulating body requires that the excess is stored in bonds and other security deposits. On the
other hand, excess money is supplied when the supply is low, and the demand is high. It is
therefore important to note the security market is the main regulator of the economic forces of
demand and supply.

Australian Market 4
Bibliography
Elliston, B. D. M. a. M. I., 2012. Simulations of scenarios with 100% renewable electricity in the
Australian National Electricity Market. Energy Policy. Volume 45, pp. 606-613.
Humphrey, J. a. L. D., 2011. Australian socially responsible funds: Performance, risk and
screening intensity. Journal of Business Ethics, 102(4), pp. 519-535.