Policies to combat BOP issues and the CAD (1 Viewer)

[somecooldude]

can anyone PLEASE give me info on government policies used to combat the BOP issue and the CAD.

thankyou thankyou

 

[nick1048]

CAD... well I dont see why you would get out of it, i.e Australia has a CAD and as long as they can service the debt they seem to be happy. Globalisation in the long run results in minimization of current account deficit its one of the effects. Dont u have a textbook atm??? The answer is in the first three chapters

 

[somecooldude]

yeah but we have to talk abt macro and micro stuff and its relation to BOP

its not really policies to get rid of the problem. more like policies to manage the problem.

 

[gibbo67]

the government can implement a number of policies to reduce the severity of the CAD

1. it can budget for a surplus (fiscal policy) to prevent 'crowding out' the australian finance market to the private sector, thus the local private sector is not forced to look overseas for surplus capital resources; - remembering that net income outflow is the greatest contributor to the CAD

2. the government could increase the level of national savings by encouraging the popluation to save in bank accounts and superannuation plans through tax incentives, or force the population to save through compulsory superannuation

3. the government could encourage the production of elaborately transformed manufactures through microreforms such as those to the labour market, goverment enterprises, national competition policy: - remembering that 60% of australian exports are derived from primary industry (commodities), which are more prone to price fluctuation on internaitonal markets and are not value added

these are just a few that i can remember off the top of my head

 

[somecooldude]

thanks dude

 

[neo o]

Instead of thinking about it in terms of policies, just remember that the CAD in Australia is caused by both cyclical and structural factors.

Cyclical Factors are caused by fluctuations in the world economic cycle (see your textbook for causes etc) and Structural Factors (i.e.: Australias I/S imbalance) any policies that move to minimise these two problems will improve the CAD, conversely any policies that do the opposite, will contribute to the CAD, i.e.: increased government spending.

 

[miffytoki]

- i would make links with cyclical factors and how the government is controlling economic growth as to restrict imports (which fluctuate the CAD)....(u can mention fiscal and monetary policies here and use recent date esp with the RBA's tampering last year and the budjet)

- but also mention Superanuation as a means of increasing savings which will lower foreign debt and liabilities in the future.....

-also keep in mind that the BOP and CAD isn't always a problem (i forget which argument this is....(look up some ross gittens) this is because the debt and servicing cost is manageable and is repaid by the capital that generates profit (paid for my the debt in the first place)....

-its also nice to mention the exchange rates...and how like the any fluctuation will increase or decrease the amount of debt as denominated in foreign currencies (i think 60% of the debt is in foreign currencies...but don't quote me on that)

in terms of micro tho.....i think i would refer to those policies that aim to increase australia's export base and improve international competitiveness by increasing australia's technical efficiency....such policies include NCP (1995)