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A country has an absolute advantage when it can produce a good using fewer resources (or more output with the same resources) compared to other trading partners. Reflects differences in factor endowments and productivity levels between nations.

A country has a comparative advantage when it can produce a good at a lower opportunity cost than other countries, even if another country has an absolute advantage in all goods. Foundation for explaining why trade benefits both nations.

0.5 tonnes of wheat. Opportunity cost = quantity of foregone good / quantity of produced good. To make 1 car, Australia must give up 50/100 = 0.5 tonnes of wheat.

0.5 textiles. Opportunity cost = 100 textiles / 200 microchips = 0.5 textiles foregone per microchip produced.

1) Increased demand for Australian exports; 2) Rising interest rates in Australia (attracting foreign investment); 3) Positive investor sentiment/confidence in Australia; 4) Inflow of foreign direct investment; 5) Speculative buying by currency traders.

1) Australians buying fewer imports (less need to exchange AUD for foreign currency); 2) Lower Australian interest rates (reducing capital inflows); 3) Negative economic outlook (capital flight); 4) Decreased foreign direct investment into Australia; 5) Australians repatriating earnings overseas.

Records all transactions involving goods, services, income flows and current transfers between Australia and the rest of the world. Includes exports, imports, net income from abroad, and current transfers. If positive, Australia is a net saver; if negative (CAD), Australia spends more than it earns internationally.

Records transactions involving assets (real and financial) between Australia and other countries. Includes foreign direct investment (FDI), portfolio investment, loans, and changes in reserve assets. Reflects international capital flows and investment positions.

When Australia's current account balance is negative; spending on imports and foreign income payments exceeds export earnings and foreign income receipts. The deficit must be financed by capital inflows (foreign investment). Sustainable only if financing investment in productive assets.

Total external liabilities (money owed to foreigners) minus total external assets (Australian holdings abroad). If positive, Australia owes more to foreigners than foreigners owe Australia. Accumulates when current account deficits are financed by overseas borrowing rather than investment.

The value of Australian equity (shares) held by foreigners minus Australian equity holdings in foreign companies. Reflects foreign ownership of Australian companies. Part of the broader financial account; distinguishes between debt and equity financing of current account deficits.

1) Tariffs—tax on imports (e.g. 10% import duty on cars); 2) Quotas—quantity limits (e.g. maximum 50,000 tonnes of sugar); 3) Export subsidies—government payments to domestic producers (e.g. agricultural subsidies); 4) Non-tariff barriers—standards, regulations, licensing (e.g. strict food safety rules); 5) Embargoes—complete trade bans.

Winners: domestic producers (higher prices, increased output) and government (revenue). Losers: consumers (pay higher prices, consume less), foreign producers, total economic efficiency declines (deadweight loss from reduced trade). Net effect is negative for economy overall—efficiency losses exceed producer gains.

Administers multilateral trade agreements, facilitates trade negotiations (rounds), resolves trade disputes between members, promotes most-favoured-nation (MFN) treatment and non-discrimination. Aims to reduce tariffs, liberalise trade, and prevent protectionist policies. Australia is a founding member.

Bilateral or regional agreement between countries that eliminates or reduces tariffs and trade barriers on goods and services between signatories while maintaining external tariffs on non-members. Examples: Australia–US FTA, CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership, includes Australia), Australia–China FTA, AANZFTA (ASEAN).

1) Technological advancement—internet, telecommunications, reduced transport costs enable global production chains; 2) Trade liberalisation—WTO, FTAs, reduced tariffs; 3) Financial integration—foreign direct investment, capital flows, multinational corporations; 4) Labour mobility—migration, outsourcing; 5) Deregulation in financial and product markets.

Unemployment arising from mismatch between skills demanded by employers and skills possessed by workers, or geographic mismatch between job locations and worker residence. Often results from technological change, industry decline, or globalisation shifting demand. Requires retraining or geographic relocation—not remedied by increased demand alone.

Globalisation causes: 1) Manufacturing decline as production shifts to lower-cost countries; 2) Skill-biased technological change favouring high-skill workers; 3) Geographic relocation of employment; 4) Rapid industry shifts requiring retraining. Workers in declining sectors (e.g. textiles, auto manufacturing) face job loss and require new skills to re-enter workforce.

Gross Domestic Product divided by total population. Measures average income per person. Key development indicator reflecting economic productivity and living standards. Higher GDP per capita correlates with better access to healthcare, education, and infrastructure. Useful for comparing living standards between countries.

Composite measure combining life expectancy (health), mean years of schooling (education), and GNI per capita (income). Ranges 0–1. Captures broader development than GDP alone. Australia typically ranks in Very High HDI category (>0.8). Better reflects quality of life than income measures alone.