You would need to initially define the terms: Globalisation, Balance of Payments and Exchange Rate. Then discuss the relationship between them all in terms of the theory you have learnt - do NOT delve into specifics at this point. This is not a globalisation response, it is more along the lines of globalisation --> Balance of Payments impacts and globalisation --> Exchange rate impacts. So if you wanted to you could divide this essay into two portions.
In terms of BOP think about aspects of globalisation that have affected BOP, both positive and negative attributes. This consitutes another divide in your response, i.e. the pros and cons of globalisation on the balance of payments. Now that you have the structured organised you can look at the Australian economy and it's current BOP circumstances. The massive CAD is an excellent starting point, you can discuss how globalisation has promoted domestic expenditure, how market diversity has promoted spending thus constituting ever-growing portions of the CAD. Also examine the role of TNCs, have they had an effect on the balance of payments in the Australian economy? Analyse the flow of capital (the liquidity of funds) and the impact of international trade flows on foreign liabilities. This two connects to both globalisation and the balance of payments. This section should take a considerable portion of time and perhaps consume 3 or so solid paragraphs. A conclusive statement could summarise the positive impacts of globalisation as a consequence of such a deterioration of the BOP.
Now address the second part of the question. Pay attention to the International Business Cycle that has emerged as a product of globalisation and the principle of "following suit." This principle holds true for interest rates in central banks also. For e.g. if the US increases interest rates, Australia and other capital competing nations must 'follow suit' in order to attract foreign investment. You must then discuss the relationship between interest rates and exchange rates (again this is theoretical, however providing examples you may know from contemporary statistics will get you those extra marks). If your research shows a negative effect on the exchange rate through the globalisation process i.e. you believe the volatilility of the ER has been increased significantly by globalisation, and you have the proper justification, make sure you include this information. If you believe however the globalisation has promoted a 'dirty float' and that pure market forces should determine the ER exclusively, (again justification is required) you may add this information in here.
Conclusively, you should summarise the key fact from both sections. Having read a considerable essay filled with all this substance and statistics can prove to be confusing and this should be the area where you clarify the impact of globalisation on Australia's BOP and ER. Only ever refer to globalisation as a means of impacting upon the BOP and ER. The marker is not concerned with the pedantics of globalisation and the emergance of better living standards etc etc. This question is not asking you to discuss globalisation, so please do not leave yourself vulnerable for criticism by including massive sections of informations about the globalisation process.
Nick1048
