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This essay will aim to explain the composite construct of the balance of payments (BOP) of a country, identifying the components of the monetary and financial flows within this construct and comparing the difference between the Australian and U. ... ) 1989); however it is important to note that the balance of payments includes unilateral transfers such as gifts, government grants and pensions, that is the provision by one party of something of economic value to another party without something of economic value being received in return (U. ...
In terms of a nation’s BOP, transactions are measured as receipts and payments. These transactions, which are generally valued at market prices, are recorded on the basis of the double entry accounting principle, in which each transaction gives rise to two offsetting entries of equal value so that, in principle, the resulting credit and debit entries always balance. ... The difference between these items is known as the balance on merchandise trade. ... If a countries current income receipts from exports of goods and services and from income on foreign assets, exceeds payments for imports and income payments on foreign debt, then the country will have current account surplus. Likewise if the current payments for imports and debt servicing exceed income from exports and income on foreign assets then the country will have a current account deficit (Australian Bureau of Statistics, 2002). ...
In reports pertaining to a country’s BOP, a concept know as the ‘basic balance’ is often mentioned. ... The focus of the basic balance is the long term trends in international transactions. ... To understand this, it should be noted that in order for a countries BOP to be in a state of equilibrium, three conditions must prevail:
The basic balance concept must equal zero. ...
The following two tables refereed to as exhibit 1 and exhibit 2, outline the balance of payments accounts for the U. ...
Australia’s Balance of Payments Statistics
1993-2003
(Millions of dollars)
Source: (Australian Bureau of Statistics, 2003)
Year Current
Account Capital
Account Financial
Account Net errors & omissions
1993-94 - 91989 - 1299 81448 1799
1994-95 - 117678 - 1723 129933 -10532
1995-96 -1010297 - 927 86195 19958
1996-97 -117203 - 654 137173 -19316
1997-98 -127684 - 1044 219210 -90482
1998-99 - 204691 - 740 75740 129691
1999-00 - 290846 - 4843 236570 59119
2000-01 - 91458 - 799 456341 -44084
2001-02 - 393745 - 1062 415592 -20785
2002-03 - 480861 - 1285 527998 -45852
Year Current
Account Capital
Account Financial
Account Net errors & omissions
1993-94 - 16047 317 16764 -1034
1994-95 - 28440 572 28421 -553
1995-96 - 21452 1070 17815 2567
1996-97 -17602 1317 17553 -1268
1997-98 - 22807 1127 24642 -2962
1998-99 - 33607 1167 30114 2326
1999-00 -32320 1053 31059 208
2000-01 -18334 1109 15277 1948
2001-02 -21938 1016 21051 -129
2002-03 -42463 1298 41735 -570
US Balance of Payments Statistics
1993-2003
(Millions of dollars)
Source: (Bureau of Economic Analysis, 2003)
Using the above tables, a comparison can be made between Australia and the US in regard to the performance, direction and implications for these countries of their respective BOP.
Approximate Word count = 2155
Approximate Pages = 8.6
(250 words per page double spaced)
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