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analyse and examine the relationship (i.e. movement) between each bank’s growth in foreign currency liabilities and exchange rate, relative inflation rates and relative interest rates.
Topic: Assessment of the relationship between the foreign currency liabilities of Australian banks and three key macroeconomic variables.
Task Details: Since the deregulation of financial markets. banks have been looking at international financial markets as an alternative cost-efficient source of funds. Students will research the relationship between growth in foreign currency liabilities of the four big banks (ANZ. Commonwealth Bank, NAB and Westpac) and relative interest rates, relative inflation rates and the value of the Australian dollar.
Students should: (1) Obtain Australia and United States of America (USA) data on inflation rates, interest rates (i.e. US Federal Reserve Funds rate and RBA’s cash rate), and the exchange rate of the Australian dollar (AUD/USD).
(2) Obtain the annual reports of the four big banks, from 200610 2018, and review and summarise each bank’s foreign currency liability.
(3) Produce graphs of the following: (i) percentage change in foreign currency liabilities vs. exchange rate; (ii) percentage change in foreign currency liabilities vs. (Inflation (US) – Inflation (AUS) and percentage change in foreign currency liabilities vs. (i.e. Interest rate (US) – Interest rate (AUS)).
(4) Critically analyse and examine the relationship (i.e. movement) between each bank’s growth in foreign currency liabilities and exchange rate, relative inflation rates and relative interest rates. Are growths in the four big banks’ foreign currency liabilities influenced by changes in the value of the Australian dollar, or relative inflation rates, or relative interest rates or all of them?
(5) Australian businesses and home mortgage holders have been urging the Australian government to pass a law compelling banks to fully pass on changes in the RBA’s cash rate to them. Given your insights from parts (1) – (4), recommend an appropriate policy to the government, pass the law, or keep the status quo, or do something else.
Research RequirementsStudents need to support their analysis with reference from text and a minimum of six (6) suitable, current, and academically accepted sources • check with your tutor if unsure of your sources. Students seeking Credit or higher grades should support their analysis with increased number of reference sources consistent with the grade they are seeking.