Managerial Economics Macroeconomics

Question: Discuss about theManagerial Economicsfor Macroeconomics. Answer: Reasons of Surging Housing Price in the Australia Housing prices are influenced by various factors in an economy. According to ASAD concept of economics, whenever demand is higher than the supply then pricing of products and service gets increased (Australian Government, 2016). There are various reasons of increasing housing prices in the Australia, the detail of which is as below: Interest Rate Low interest rate focuses on the bottom repayment in advance that enables the debtor to borrow more through the specified refund to the segment of returns. Due to this reason demand and price of housing are increasing in the Australia. Along with this, the interest rate of Australia has decreased since 2010 due to recession in the Australia (Reserve Bank of Australia, 2010). After that time, the interest rate increased reasonably in 2011-12 and consequential interest rate by the end of 2015 has become 2.25%. It signifies that lower interest rate increases the housing prices in the Australia. Investment Demand People are investing a lot of money in the housing sector since 2012. Consequently, investor of the real estate drives the housing prices up in the Australia. In addition to this, there are various factor that have lead to increase in housing price in Australia such as tax benefit, increasing rental income, Extensive development, and social demographics in economy of Australia and capital market. These all factors increased the investment in housing sector. Financial Deregulation and Innovation The financial system of Australia has removed restrictions in industry in year 2010. Furthermore, the loan actions are managed directly by the reserve bank of Australia, which are related to the financial institution (Moran et al, 2014). There are various lending sources in the Australia such as overseas banks, credit insurers, investors, advance dealer, and industry finances, which infiltrated into the market in terms to offer the housing loan and finance. Because of availability of alternative new sources and new loan criteria in Australia, secondary housing finance market mobilized the house purchases. Consideration has been involved in lending criteria of the entire value and income of household to create the lending limits. It proved to be compatible to increase the housing demand and prices in the Australia. Government Assessment There are various expenditures, which affects the housing prices in the Australia such as Stamp obligation in selling and moving of property, builders imposed, income tax and GST on building. The government charged the taxes on the usage and growth of development property. Due to these reasons, housing prices started increasing in Australia. Economic Growth: There is a positive relationship between the requirement of housing and revenue of the families in the Australia. When housing demand increases then income also increases due to income elasticity of demand (Dollman et al, 2015). Along with this, it is also seen that increasing demand of housing sector ultimately leads to hike or surging housing prices in the Australia. Wealth Effect Total wealth of people in Australia is double as compared to the net assets housing. It is called as wealth effect, which leads to increase in utilization of money or investment (Nahm, 2016). Along with this, it can be said that housing prices are increasing because of increasing demand of housing in the Australia. Macroeconomic Policies that can be Undertaken by Australian Government to Ensure the Affordable Housing Prices Macroeconomic Policy of the Government: When the government experiences high inflation and unemployment, it interjects some policies and actions to regulate the market activities to ensure the affordable and rational prices. The macroeconomic policies of the Australian government affect the demand and supply of the house in the country. In Australia, people deeply wish to be owner of a house in a metropolitan city but due to the high price of the houses, they cannot afford house in developed cities. Australian government has developed a National Affordable Housing Agreement that ensures the affordability, safety, and sustainability of houses in country (Government of Western Australia, 2010). This agreement (NAHA) was introduced to resolve the issues of affordability of housing prices in Australia. This agreement was developed mostly by considering the welfare of lower and middle class people. The agreement has a worth of $6.2 billion that backs the middle and lower class people in purchasing a house for dwelling. The NAHA with support of the National Partnership Agreement provides help to homeless people, and people dwelling in remote areas in Australia (Australian Government, 2016). Australian government has gone for improving foreign investment framework to attract the more investors in real estate. This will increase the supply of houses in the country that will bring down the house price to the affordability of the middle and lower class people also. Besides this, the Intergovernmental Agreement (IGA) is propounded by Council of Australia Government to support the alteration in the broad areas throughout the Australia. IGA principles are applicable as economic interest as well as social policy and outcomes. Apart from this, the local government, state government and commonwealth government have the responsibility of regulating the pricing of the houses in the Australia to maintain the sound economic condition in the country. Local Government: The Local government plans, develops, and manages the regulatory system to control housing market fluctuation. Local government enjoys the power of funding, policy making, and designing of regulations to generate affordable houses for people in Australia. Local government plans and develops the national standards for the marketers, as they have to stay certified by the government. Australia has faced housing issues. Lots of people are still homeless in the Australia due to high housing price that debars them from purchase of a house. People are not able to purchase their personal house in the Australia due to the pricing bubble in the housing market. The local government takes actions against these issues for the betterment of the community in the Australia (Gurran et al, 2015). The government backs to public in purchasing houses by providing them the offers of partnership. The local government frames policies related to regulations for building and approvals, planning for urban deve lopment, development assessment processes, and infrastructure charges (Treasury Government of Australia, 2016). Along with this, the local government plans and implements different policies to restrict the housing price to ensure the affordable housing in the country. Moreover, the local government develops strategic alliances, builds up capacity of the community, and exercises its regulatory power to stabilize the housing price at affordability of the people. State Government: The government can work with both the state and local government for the strategies that are required for the growth of nation. All can ensure the plan that can be beneficial opportunities for the youth. A council of ministers can be established to represents the matters of the infrastructure and for solving the problems related to housing policies. It can monitor and report the planning schemes that are needed for the development of the infrastructure (Ahuri, 2016). It can maintain the targets for the home ownership that can be easily affordable by all the levels of the people. It can review all the targets that are maintained and needed to improve reliability of all the housing policies by the government. The expenditure on the development of infrastructure should be urban based as all the younger generation tends to settle in the urban regions. The various loan schemes should be maintained by the government to encourage more reliability of their plans and should be equally gained by all the people (Habitat, 2016). The skilled people should be employed in the housing sector, as they have better understanding of the need of the younger generation. The goods and services tax must be removed from the infrastructure sector, as putting more burdens on the youth increases the prices of the property in a significant way. The previous polices that were established in the nineties should be reconsidered by the government for the development of the urban areas, as they were very cost effective. Commonwealth Government: The commonwealth government frames various macroeconomic policies related to the taxation, financial sector, infrastructure development, and policy modification, fiscal and monetary policy, colonization, and national housing agreement. The commonwealth government offers the loan at the cheaper rate to raise capacity of people for affordable houses in a well-developed city. Commonwealth government is the highest legislative group in the country, which consists of the head of government, state leader, chief of a particular region, and president of the country. Commonwealth government focuses on reforms in the infrastructure of the telecommunication, aviation service, postal service, transportation service, roads, and public housing (Parliament of Australia, 2010). Commonwealth government provides free on partnership houses to the people having their likelihood below the poverty line decided by the government. The commonwealth government can decreases the taxes, levies and charges to bring down the housing price in the Australia. IGA on the federal financial relationship helps the government to increase the supply of the money to increase the housing affordability of the people. Commonwealth State Housing Agreement and Commonwealth Rent Housing are the two major schemes of the commonwealth government for providing the funding to public for housing affordability. References Ahuri (2016). International practice in planning for affordable housing. Retrieved from: https://www.ahuri.edu.au/__data/assets/pdf_file/0017/2834/AHURI_Positioning_Paper_No99_International_practice_in_planning_for_affordable_housing_lessons_for_Australia.pdf Australian Government (2016). Housing support. Available at: https://www.dss.gov.au/housing-support/programmes-services/national-affordable-housing-agreement (Accessed: 16/10/16). Australian Government (2016). National Affordable Housing Agreement. Retrieved from: https://www.dss.gov.au/housing-support/programmes-services/national-affordable-housing-agreement Dollman, R., Kaplan, G., La, G. and Stone, T. (2015). Household Economic Inequality in Australia (No. rdp2015-15). Reserve Bank of Australia. Gurran, N., Phibbs, P., Yates, J., Gilbert, C., Whitehead, C., Norris, M., ... Goodman, R. (2015). Housing markets, economic productivity, and risk: international evidence and policy implications for AustraliaVolume 1: Outcomes of an Investigative Panel.Australian Housing and Urban Research Institute (AHURI),1, 1-101. Habitat (2016). Housing Review. Retrieved from: https://www.habitat.org/sites/default/files/housing_review_2015_full_report_final_small_reduced.pdf Moran, M., Porter, D. and Curth, J. ( 2014). Funding Indigenous organisations: improving governance performance through innovations in public finance management in remote Australia. Australian Institute of Health and Welfare AIHW. Nahm, D. (2016). The effects of monetary policy on consumption, housing wealth and house prices: An Australian perspective. Journal of Economic Reasearch, 21(2), pp.175-204. Parliament of Australia, (2010). The Commonwealth Government's Role in Infrastructure Provision. Retrieved from: https://www.aph.gov.au/About_Parliament/Parliamentary_Departments/Parliamentary_Library/pubs/rp/rp0304/04rp08 Reserve Bank of Australia (2010). Structural change in the Australia economy. [Online]. Available at: www.rba.gov.au/publications/bulletin/2010/sep/1.html (Accessed: 16/10/16). The government of Western Australia (2010). Affordable Housing Strategy. Retrieved from: https://www.housing.wa.gov.au/HousingDocuments/AHS_Report_final.pdf Treasury Government of Australia (2016). Affordable Housing Working Group. Retrieved from: https://www.treasury.gov.au/~/media/Treasury/Consultations%20and%20Reviews/Consultations/2016/CFFR%20Affordable%20Housing%20Working%20Group/Key%20Documents/PDF/Issues_Paper.ashx