2025HSCExtended response

Q25

20 marks

Question

Explain the reasons for trends since 2016 in the size and composition of Australia’s Balance of Payments. In your answer, refer to the information provided.

The COVID-19 recession and associated international border closures resulted in a sharp decline in education and tourism service exports, but exports of these services have grown strongly in recent years following the re-opening of the border. The composition of Australia’s capital flows has also changed significantly in the past decade or so. Unlike in the past, Australia’s economy since 2017 has generated savings in excess of domestic investment. © Reserve Bank of Australia, 2022

[Chart showing current account balance, net goods and services, and net primary income from September 2016 to September 2024, in $ billion]

Luna-requested uncropped source page for question 25; requires human review and cropping — Reviewed visual · source page 26

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Solution

Criteria	Marks
Demonstrates a clear and comprehensive understanding of the reasons for recent trends in the size and composition of Australia’s balance of payments since 2016<br>• Synthesises own knowledge and understanding with the information provided, to develop a sustained, logical and cohesive response<br>• Integrates relevant economic terms, concepts, relationships and theories	17–20
Demonstrates a sound understanding of the reasons for recent trends in the size and composition of Australia’s balance of payments since 2016<br>• Synthesises own knowledge and understanding with the information provided, to develop a logical and cohesive response<br>• Applies relevant economic terms, concepts, relationships and theories	13–16
Demonstrates a sound understanding of the reasons for recent trends in the size OR composition of Australia’s balance of payments since 2016 OR<br>• Demonstrates some understanding of the reasons for recent trends in the size and composition of Australia’s balance of payments<br>• Uses own knowledge and understanding with the information provided, to develop a coherent response<br>• Uses relevant economic terms, concepts and relationships	9–12
Demonstrates some understanding of trends in Australia’s balance of payments since 2016<br>• Presents a generalised response<br>• Uses some economic terms and/or concepts	5–8
Identifies some relevant information<br>• Presents a limited response that uses some economic terms	1–4

Answers could include:

Structure of the Balance of payments
- Current Account, debits and credits
- Capital and Financial Account
Links between key Balance of Payments categories
Trends in the size and composition of Australia’s Balance of Payments
- international competitiveness: protection, productivity
- terms of trade: exchange rates, domestic and international growth rates
- international borrowing; international and domestic interest rates
- foreign investment: saving and investment gap, mining investment boom
Effects of these trends on Australia’s Balance of Payments.

Supplied marking guidance · human reviewed

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Syllabus alignment

Australia’s Place in the Global EconomyThe Global Economy

Trade and financeInvestigate Australia’s trade, balance of payments, exchange rates and external stability.
Globalisation and tradeInvestigate globalisation, trade, protection, international organisations and economic development.

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