- Australia’s trade flows have increased substantially over recent years
- the rate of growth in financial flows has been much greater
- international businesses have bought Australian assets and invested in Australian businesses
- Australian companies have increased their overseas investments.
- International financial flows were less important in the postwar economic boom of the 1950s to the early 1970s
- floating exchange rates (since 1970s) allowed capital to flow more freely across borders.
- the composition of Portfolio investment over Direct investment has grown greatly over the last 30 years
- Prior to the deregulation of the financial sector, most financial flows came into Australia in the form of direct investment
- Governments preferred direct investment, because it brought the benefits of job creation and technology transfer
- Portfolio investment was not as important, as overseas purchase of shares was relatively small
- and overseas loans were not common
4.3 review questions:
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Explain the difference between direct and portfolio investment flows.
Direct investment is establishing businesses overseas or investments for the sake of ownership (usually over 10% of a foreign business)portfolio investment is speculation (usually <10%)
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Identify TWO factors that have influenced financial flows into and out of Australia in recent years.
- superannuations collecting dividends from overseas
- deregulations in the financial sector
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Discuss the extent to which Australia’s financial flows have been influenced by globalisation.
- export markets for mined minerals