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    3. BUSINESS CYCLE The Business Cycle shows the four phases of economic activity in the economy. Peak phase Contraction phase Trough/recession phase Recovery phase Economic activity varies over time.

    4. PEAK PHASE The peak phase is at the upper limit of productive/economic activity where resources are fully utilised and there is full employment. If a peak coincides with a boom where resources are stretched, competition for resources will lead to inflation.

    5. CONTRACTION PHASE The contraction phase follows a peak as consumers reduce spending and business activity slows down. This leads to an under utilisation of productive resources and a fall in employment levels.

    6. TROUGH/RECESSION PHASE The trough represents the lower turning point of the cycle where production, employment levels; job vacancies are at their lowest levels. A recession occurs when the economy/productivity stops growing for at least six months. Inflation is generally low in a trough/recession. A severe recession is called a depression. A depression occurs when productivity continues to fall for an extended period of time.

    7. RECOVERY PHASE The recovery phase is the period when business expands production and uses its excess capacity, buys new plant and equipment and employs more workers. Productivity increases. Usually this upturn is in response to increased consumer spending.

    8. MONETARY POLICY Monetary policy is used to stimulate or slow down economic activity/growth by influencing the size of the money supply or the cost of money (interest rates). Monetary policy indirectly affects bank lending and credit creation activities by affecting: Interest rates Availability of funds The main instrument of monetary policy at the present time is Open Market Operations (OMO)

    9. FISCAL POLICY Government policy involved with revenue raising through taxation and with setting the level of different types of expenditure Variations in these two areas have a significant impact on demand in the economy, especially in so far as the government chooses to operate a budget surplus or deficit

    10. VALUE OF THE AUSTRALIAN DOLLAR Changes in the value of the Australian dollar impinge on all areas of business that involve international transactions and on the financial institutions own trading in foreign currencies.

    11. LOWER EXCHANGE RATES Lower exchange rates encourage exports, as the prices of our goods become cheaper overseas. Lower exchange rates discourage imports as the prices on imports become more expensive Lower exchange rates make loan repayments on overseas loans greater in value and increase the debt. Lower exchange rates may lead to more overseas investment in Australia if there is sufficient confidence in the economic future of Australia. Lower exchange rates generally improve the Balance of Trade but increase interest payment to overseas.

    12. INTEREST RATES Compensation to the lender for giving up liquidity The cost to the borrower for the opportunity the loan affords him/her. The annual rate of return on the market price of security The ratio between dollars paid per year and dollars borrowed

    13. FACTORS AFFECTING INTEREST RATES The amount of risk involved ‘risk premiums’ The maturity term Degree of liquidity of the asset Administrative costs Inflation

    14. RELATIONSHIP BETWEEN INTEREST RATES IN AUSTRALIA & OVERSEAS Heavy influence of overseas interest rates because of Australia’s high international debt levels Interest rates in Australia tend to be higher than the USA and Japan Degree of risk lending to Australia Relative inflation rate in Australia compared to overseas rates

    15. INTEREST RATE IMPACT ON FINANCIAL SERVICES INDUSTRY The stability of interest rates impact on the financial services industry in many ways. Businesses decision to borrow Businesses will borrow as long as the profits they make using the borrowed funds is sufficient to cover the cost of interest plus return a profit margin Consumer decision to borrow Consumers tend to borrow more if rates are low If rates are high they borrow less If interest are unstable customers tend to become nervous and delay borrowing Financial institutions lending margins If rates are unstable it makes it difficult for financial institutions to calculate their interest rates differential and may therefore lead to losses.

    16. POLITICAL CLIMATE A stable political climate encourages private individuals as well as businesses to both spend and borrow provided interest rates are at an acceptable level An unstable political climate a general lack of confidence in the market and will lead both private individuals and businesses to defer spending and borrowing until confidence is restored in the market

    17. MEDIA, PRESS & PUBLIC RELATIONS REPORTS The media and press have a major impact on the general publics understanding of the local and world affairs and the economic situation world wide. What is presented in the press and media s strongly influenced by the views of those that give financial support to the organisation or pay for the advertising. A lot of resources are spent on advertising in the media and press that is aimed at influencing our buyer behaviour especially on financial services products. Sponsorship at major sporting events also targets particular sectors of the finance market and put their brand name before many viewers. Public relation reports do not have such a strong impact on the publics and businesses decision making as they are generally only circulated amongst interested parties


    19. ACCOUNTING Accounting businesses offer a wide range of services: Accounting services Financial Advice Grant loans or intermediate loans between clients Deal in insurance and superannuation produces and / or advise on these products Invest clients funds

    20. INSURANCE Insurance companies offer a range of services: Life & general insurance products Invest policy holders funds Make loans to policy holders

    21. RETAIL FINANCIAL SERVICES Retail companies offer a range of services: Sell retail produce Offer credit to purchases of their retail products Offer electronic funds transfer services at point of sale (EFTPOS) Some offer cash withdrawals to bank clients on their debit cards

    22. LENDING SERVICES Lending services are provided by a variety of business such as: Finance companies Building Societies Merchant banks Cash converters stores (pawnbrokers) Some company just set up as lending services Pastoral Societies (eg Elders) Mortgage brokers (Aussie Home Loans)

    23. BANKING Banking in Australia is made up of four major banks and a number of smaller banks and community banks that operate in the retail banking sector and some foreign banks that mainly operate in the wholesale banking sector. The retail banking sector is made up of: Commonwealth Bank National Bank ANZ Bank Westpac St George Bank Bendigo Bank Queensland Bank

    24. CREDIT UNIONS There are wide ranges of credit unions many of which offer full banking services to their members such as: Victorian Teachers Credit Union The Police Credit Union Australian Defence Credit Union

    25. FINANCIAL PLANNING There are many business set up with the sole aim to give clients advice on financially planning for their future. Some of the larger businesses in this area are subsidiaries of or a partially owned by larger financial organisations, in the market there are also small providers. These business: Give advice on wide range of investment products They manage the investments for their clients They give advice on superannuation funds They manage superannuation fund for their clients

    26. POST OFFICE Post offices now act as agents for a number of banks taking: Deposits Withdrawals and Credit card payments They accept payments as collection agents for many other businesses especially utility providers such as: Telstra accounts Origin Energy accounts Water rates etc

    27. CREDIT MANAGEMENT Credit management agents also manage and collect credit repayments on behalf of other companies many companies now outsource their accounts. This also includes companies who collect outstanding debts (generally bad or doubtful debt) on commission of other companies

    28. CREDIT & LENDING SERVICES There are a range of companies that offer these services such as the RACV, some car manufacturers have their own finance business and offer finance to the purchases of their own product

    29. MERCANTILE MANAGEMENT These are companies who give advice to other companies generally large companies in relation to international trade. They: Advise on mercantile law between countries Shipping / airfreight procedures Documentation Types of terms & conditions available Advice on financial arrangement Sometimes offer finance Insurance Introductory services to agents and / or prospective importer or exporters

    30. FINANCE & MORTGAGE BROKING This is a relatively new area in the financial services industry. Instead of going directly to finance provider the person goes to the mortgage broker’s who organises the best loan deal for their client. The mortgage broker has a large number of finance providers on their books and is trained to compare and select the best loan deal for their client There are also mortgages brokers such as Aussie Home Loans and Wizard Home Loans that are know as mortgage brokers because they finance their loans by a process called securitisation.

    31. CONVEYANCING Conveyancing is done by conveyancing agents and sometimes by solicitors. They check all the legal documentation involved when purchasing or selling a real estate. Thy check: The Title is in order and there are no caveats They check the standing of the property in relation to outstanding rates and taxes They check that there are no notices against the property in relation to developments or access They check all property transfer documents are completed and signed in accordance with the requirements They check the settlement documentation is all in order and that settlement sums are for the correct amount They often attend the actual property settlement

    32. RISK MANAGEMENT These are people who are employed by a project manager to assess the possible risks, the degree of risk and or the possible ways of overcoming any risks that may be involved in a particular large project. These managers specialise in assessing risk whereas he project manager may not have the specialised skills to assessing the risk of specialised projects such as financing the setting up of an oil rig in bass straight.. They assess whether a project is viable and in some instances advise on changes that could be made to make a project viable.

    33. WORKERS COMPENSATION Generally worker’s compensation claims are generally dealt with through a law firm. Cases are sometimes for small one off claims others for large claims with many people suffering from the same cause. Some lawyers specialise it taking worker’s compensation cases and often run these as case actions if there is a common cause for the compensation for example the asbestos case against James Hardie They are responsible to ensure compensation to the victim is sufficient to cover for injury costs, loss of income past, present and in some cases future earnings

    34. FINANCIAL MARKETS The Australian Stock Exchange (ASX) Equities (shares) are traded on this market Sydney Futures Exchange(SFX) Commodities and futures are trade on this market Foreign Exchange Market (FX) Foreign currencies are traded on this market Short Term Money Market (STMM) Short term and overnight securities are traded on this market Inter Company Market Companies trade their securities on this market Options Market Currency and interest rate options are traded on this market Swaps Market Currency and interest rate swaps are traded on this market

    35. Regulators of the financial services sector in Australia Government Regulators Responsibility – maintaining stability of the financial system, promoting integrity of the financial markets and protecting the interests of those dealing with financial institutions and corporations Australian Competition and Consumer Commission (ACCC) Deals with competition policy and anti-competitive behaviour in the market place Australian Prudential Regulation Authority (APRA) Responsible for protecting the interests of depositors, insurance policy holders and superannuation Australian Security and Investment Commission (ASIC) Administers the Corporations Act- protecting consumers in their general dealings with financial institutions and promotes market integrity Reserve Bank of Australia (RBA) Responsible for the conduct of monetary policy and the overall stability of the financial system

    36. Regulators of the financial services sector in Australia Market Regulators Australian Stock Exchange (ASX) Sydneys Futures Exchange (SFX) Responsibility – operating the financial markets and the supervision of the conduct of market participants ensuring that they all comp

    37. Regulations, Legislation & Codes of Practice that apply to the financial services Industry Australian Competition and Consumer Commission (ACCC) Deals with competition policy and anti-competitive behaviour in the market place

    38. Legislation Corporations Act Taxation Act Withholding Tax Goods & Services Tax Tax File Number Reporting Stamp Duty Occupational Health & Safety Anti-Discrimination & Equial Opportunity Legislation Privacy Act Australian Prudential Regulatory Authority Act Financial Transactions Report Act Business Names legislation Life Insurance Act International Accounting Standards Codes of Practice