Australia has a lot of foreign businesses and it has a lot of immigrants. Both earn Australian dollars and huge amounts would be sent back their country of origin.
His does Australia balance its books on something like this? How do the economics of it work? Would it lower Australian inflation but shortening the money supply, and raise inflation of the destination country as it prints more money to exchange the Australian dollar?
Well, I don’t know. Let’s say a Bangladeshi guy earns $1,000 AUD and sends $500 home each week, then lives off the remainder.
He’s only contributing to the Australian economy $500 per week instead of the full $1,000 in bank-invested savings or other purchases. Meanwhile the other $500, minus an exchange rate, sits in another country’s bank or contributes to purchases there, fuelling that economy.
I mean, I’m guessing here. My economics knowledge is fairly limited.
Yes, but he’s actually producing wealth in Australia. The things he does serve Australians, the products he makes wind up in Australian homes, and when they don’t, when they get exported, that same amount of capital he exported and then much more winds up flowing back into Australia.
Remember, money isn’t wealth. Money doesn’t fuel an economy, production does. And it does more than fuel an economy, it is the economy.
Just a nit-pick. The immigrant in this case is probably contributing more to the economy than the $1,000 he gets paid to do it.
That 500AUD doesn’t just sit in an account and magically contribute to anything.
Currency exchange doesn’t actually happen in a vacuum. The only reason your Bangladeshi example is able to send 500AUD to his family, is that someone who has Bangladeshi Taka wants 500AUD to buy goods or services from somewhere that accepts AUD. And there’s a very short list of countries that spend AUD.
So that 500 doesn’t disappear to never return. That 500 is sold to someone who wants to use it to purchase australian exports.
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