ATAR Notes: Forum
VCE Stuff => VCE Business Studies => VCE Subjects + Help => VCE Economics => Topic started by: bec on October 16, 2008, 08:08:37 pm
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"In 1983, Australia's financial sector was deregulated and the Australian dollar was floated."
What does this mean? It's for international studies so I don't need any intense eco explanations, but if someone could give me a quick overview that would be great.
Thanks!
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Deregulation meant they removed or reduced barriers inhibiting efficiency, and aimed to increase participation, increase competition and increase supply, which will make the country more internationally competitive.
The dollar was floated which meant it would now react to the market forces of demand and supply. This means if more is demanded, the rate will increase. Floating replaced the Aus exchange rate being tied to another countries exchange rate.
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Deregulation in simple terms means that there was less government control over the actions of financial institutions.
Floating the dollar means that the value of the Australian dollar compared to other currencies was made to be valued relative to forces of the market. I.e. when there was lots of demand for australian goods and services, foreign countries need to pay in Austrralian dollars. Because the supply of Australian currency is limited, and demand has increased, the value of the dollar increases.
Before the dollar was floated, it was a fixed price set by the RBA (i believe)
damn marbs beat me to it. lol hope its hellpful anyways
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Thanks, that's very helpful. I just realised I think I've learnt about floating the dollar before - did Thailand float the bhat in the Asian Eco Crisis?
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Before the dollar was floated, it was a fixed price set by the RBA (i believe)
Before the dollar was floated, the RBA intervened very heavily by buying and selling Australian dollars so that the market price would equal the peg.
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Doesn't that still exist though through a 'dirty float'?
Would the difference be that it is less regular now?
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Doesn't that still exist though through a 'dirty float'?
Would the difference be that it is less regular now?
Its still pretty common I think. I know they did it in early 2000s. I think it was 2001?
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Doesn't that still exist though through a 'dirty float'?
Would the difference be that it is less regular now?
The RBA still intervenes but i forgot what its exact wording was but it only intervenes to remove what it sees as too much volatility
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See sections 6-9
http://www.rba.gov.au/marketoperations/international/ex_rate_rba_role_fxm.html
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ahk thanks. as i suspected
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Floating exchange rates are end of the day set by interbanks.
The 'dirty float' is in place to minimise erratic and excessive volatility in the FX market for the AUD/whatever. It's not down frequently though. (I mean currencies are naturally volatile compared to other markets lol)
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Floating exchange rates are end of the day set by interbanks.
by what?
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interwebs haha