Au Dollar and Japanese Beef Market Appreciation Essay

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AU Dollar and Japanese Beef Market

Appreciation of AUD 2012-2013- The AUD has had a strong appreciation over the past decade, which has led many scholars to be concerned about the impact the high exchange rate may have on certain trade-exposed sectors of the economy. Over the past few years the AUG has generally been on an upswing, at least on Real GNE, in particular since the trade boom began around 2004. The primary reason for the AUD's appreciation is that Australia's terms of trade have doubled since the millennium, with a particular rise in commodity export prices in the last few years. This has happened because higher commodity prices lead to increased investment that expands capacity in the resources sector and higher aggregate incomes result from the rise in trade -- then the rise in consumption spending on domestic products. The higher exchange rate then promotes the reallocation of labor and capital to meet the increasing demands in other tradable sectors and becomes a domino effect (See Figure 1) (Garton, et al., 2012).

Japan takes 32% of all Austalia's beef being exported. However, the weak Japanese economy, reduction in consumer demand, and the volatility of the AUD increases competition that affects AU/Japanese trading issues.

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In 2012, Australian beef exports to Japan were down 10%, the lowest since 2003. Moreover, Japan's share of Australi's global beef trade declined from 36% in 2011 to 32% in 2012 (See Figure 2) (Kondo, 2012).

Predicted decline of AUD- The more recent barometer revolving around he AUD shows that there is an expectant depreciation over the 2013 and into 2014 years. Most of the predictions indicate that this depreciation will vary by sector, but most analysts believe that regardless of the size or business type, the decline will have negative rammifications. The exception to the decline is expected to be Media, IT, Telecommunications and Utilities. Several business noted that they were concerned about the impact the AUD and Japanese Yen issues have, with 17% saying they believed there would be a positive impact, and 12% negative for a total of about 1/3 of businesses believing that there would be some sort of an impact. Aside from the yen, 34% percent of Australian businesses buy from China and 17% sell, 14% have a two-way trade; and only 35% say they have no business with most Asian….....

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