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What impact has globalisation had on global finance - Coggle Diagram
What impact has globalisation had on global finance
Overall Impact!
As a result, Australian businesses have access to funds and financing (borrowing money) from other financial markets and institutions in other parts of the world eg USA, China, South-East Asia and Europe.
Australian investors also have the ability to invest (lend) their funds internationally.
Globalisation has provided the opportunity to rapidly move funds in and out of Australia
China is one of the biggest global market influences on financial management in Australia
The continued growth of China’s economy has rapidly increased Chinese demand for Australian raw materials and natural resources such as
coal
gas
iron-ore
This has expanded the pool (and availability) of investment funds and debt financing for Australian raw materials business
China’s continuing demand for raw materials have led the Chinese government and business community to invest more in Australian resource companies and, in some cases, own them.
The growth in China’s economy and its impact on Australian exports of raw materials like coal and iron ore allowed Australia to escape some of the worst effects of the 2008 Global Financial Crisis.
Trade tensions between Australia and China are having an impact on some industries, particularly in the rural sector
some of our exports to China have been banned).
The economic outlook influence on financial management
Global outlook affects the price of shares and other assets, so when global financial markets become more volatile, investment and borrowing become more risky and the cost of borrowing rises
.
Australia is a capital-importing nation. This means that Australia as a nation does not save enough to finance its business investment
Australian banks undertake this international borrowing and then lend the funds to Australian businesses
Australian businesses need to borrow funds from overseas for investment in Australian business on international financial market
Impacts COVID 19
therefore interest rates on this borrowing rise, making business investment more expensive
Prior to COVID-19, serious threats/risks to the global economy, such as The Global Financial Crisis (2008), increased the cost of borrowing because lenders were worried about losing their investment
McDonalds is a company impacted "Substantially" by global economic fluctuations
McDonalds have proven that it is somewhat "recession Proof" by only experiencing an overall reduction in systemwide sales of 7% in 2020
Interest rates fall and remain low
Borrowing money less expensive for businesses
Central banks around the world have tried to stimulate economic growth.
The Availability of funds as an influence
Currency fluctuations and Interest rates
Approximately half the world’s foreign trade is conducted in US dollars
Whatever currency is chosen by an Australian global business, it has to be changed into Australian dollars.
Businesses use the services of foreign exchange dealers (often operating as a division of a bank) to facilitate foreign currency dealings.
Changes in interest rates can increase the cost of these funds considerably. Interest rate increases can also impact upon the willingness of businesses domestically and overseas to invest in business activities
They can also impact upon the willingness and ability of domestic and overseas customers to purchase goods and service
Australia is seen as a low-risk country for investment, with relatively good rates of return
As a result, Australia has attracted high levels of foreign investment
The flow of investment into Australia far exceeds the flow outward
Low interest rates across the globe assure that businesses like McDonalds have relatively easy access to funds if required. This was evident when the company was able to raise US$5.5 billion at the start of the covid 19 pandemic