Investigating Economic Issues

This study investigates the impact of demand and supply on the house market and its effect on the economy. It explores the Australian and Canadian housing markets, highlighting the importance of resource development and foreign direct investment. The study concludes that investment in the housing sector is crucial for economic growth.

Running head: Investigating Economic Issues
INVESTIGATING ECONOMIC ISSUES
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Investigating Economic Issues
Table of Contents
Introduction......................................................................................................................................2
Description of the relevant market..................................................................................................2
Analysis...........................................................................................................................................5
Conclusion.......................................................................................................................................8
Reference list...................................................................................................................................9

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Investigating Economic Issues
Introduction
Understanding the demand of the customers and making the supply is one of the
important strategies that most of the business organizations are taking. This is important in the
sense that through the development of effective policies. It is highly important in the sense from
the global perspective because of the fact that through this demand supply theory, the economy
will be aiming to increase the demand and supply. Currently the house market is one of the
products that are mainly dealing with rapid changes in quantity due to changes in price. The
main aim of this study is to highlight the importance of both demand and supply of the house
market and how they are having impact on economy.
Description of the relevant market
Currently the Australian house market is going through tough phase. The residential
property cycle played a huge role in developing the economic structure of Australia. The
opportunity that is lying within the economy is actually boosting up the welfare of the whole
economy. The rate of investment that is happening within Australia in 2016 and 2017 has
increased by 20% and 16% respectively. On the other hand, the contribution of GDP in these two
years has increased by only 1% (ABC News, 2017). The market is becoming competitive in
nature and the numbers of dwellings in Australia are increasing gradually. Both the housing
market in Australia and Canada is having more or less same characteristics. However, the
households of Australia are having more debt compared to the household living in the Canadian
market.

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Investigating Economic Issues
Figure 1: Debt ratio of Australian
(Source: ABC News, 2017)
The current household debt for the Australians is 122% on annual economic output. Even
at the low interest rate that is, prevailing within the economy is forcing the economy of the
Australia to pay huge bills. On the other hand, debt is one of the biggest problems because of the
fact that debt is paid at the cost of future saving and if individuals have to pay the debt at the
current price then the amount of money that can be saved for future will decrease (ABC News,
2017). This in turn will reduce the spending power of the individuals or wealth buildup capacity.
However, less wealth buildup capacity is going to reduce the purchasing power parity of
individuals is going to push the economy towards the slower side. This in turn will reduce the
economic growth of the Australia that in turn will reduce the long run demand of the economy.
This will force the economy to shift the demand curve towards left. The leftward shift of the
supply curve mainly will force the price and quantity to fall (ABC News, 2017).

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Investigating Economic Issues
Figure 1: Shift in the Demand curve
(Source: Created by Author)
About 75% of the mortgage is about long years and only 25-30% of the mortgage has
came back into the economy. This is important factor in the sector in the sense that this is
actually minimizing the reserves within the economy is going to decrease the future loan able
ability of the currency and the banks will not be able to induce the development of international
trade (ABC News, 2017). Through the development of better involvement of the demand and
supply factor of the housing market the economy will flourish if the economy is going to indulge
the development of resource development. About 80% of the mortgages are in variable interest
rate.
This is creating lot of pressure in the economy in the sense that economy will push
pressure on the households’ income and they will be able to highlight the importance of the
resource development. The government is willing to minimize the floating rate of interest rate
and they have tried to minimize the variable rate that is implementing the better development of
the economy. The household of the economy is having worry in the sense that it will deliver the

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Investigating Economic Issues
high price and the customers are waiting for the price to decrease. The development of the price
decrease process is going to deliver the best and market should allow operating freely in setting
up the price and quantity of households within the economy of Australia (ABC News, 2017).
On the other hand, the economy of Canada provides the housing policy advice and
government extends the support to the consumers regarding the development of the resource
distribution regarding the demand and sales of housing. Both the government is implementing
limit on lending and they are taxing foreign buyers. On the other hand, through the resource
development and resource capitalization, the economy is going to improve in the end.
Analysis
In 2016-2017, the Australia’s Foreign Investment Review Board (FIRB) claimed foreign
residential real estate applications dropped by huge margin.
Figure 2: Residential real estate approvals by year
(Source: The Conversation, 2018)

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Investigating Economic Issues
The appeal for the residential housing by the foreigners were increasing significantly
from 2013-2015. However, the appeal has seen the downfall rapidly and in a miserable way after
2015. The year 2015-16 had seen approvals of about 40,149 were granted and the amount of the
revenue that the economy generated was about AUD$ 72.4 billion and in the next year, 13,198
approvals were granted and amounted to about AUD$ 25.2 billion (The Conversation, 2018).
The government has tighter the lending policy for the locals have created the problems and
making the situation worse. On the other hand, through the development of the easiness of
lending policy is going to increase the development of the resource. This is important in the
sense that FIRB claimed that overall demand from china is falling and the investment in the
worldwide is falling. Chinese FDI is increasing and they are helping in the development in the
economic growth. The presence of hostile attitude within people living in Sydney is not allowing
the foreign investment to grow in the economy (The Conversation, 2018).
The Chinese real estate investment within the economy has increased in 2014-2015. Both
the domestic and foreign investors were claiming the fact that until 2014-2015, the economy was
having good position for investment. However, due to sublime policies of the government is
mainly making the growth of the economy slow. The changing markets of the households are
influencing the price of the products (The Conversation, 2018). The price of the product is rising
and with fall in the income level of the individuals, the purchasing power parity of the
individuals is falling. The development of the resource utilization will bring more amount of
investment within the economy so that they will bring the development of economy. Increase in
the consumption power of the economy, will increase the demand of the individuals to shift
rightward.

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Investigating Economic Issues
Figure 1: Shift in the Demand curve
(Source: Created by Author)
The rightward shift of the demand curve is going to increase the price and quantity of the
Australian housing. With better technologies such as giving advice is important in the sense that
through the development of resource gap and bringing in communication among factors of
economy that has enabled the development of housing (The Conversation, 2018). Decrease in the
level of unemployment is going to increase the price of the commodities and income will
increase the consumption of the economy. This is important in the sense that through the
development of economic growth. On the other hand, the increase in the level of investment by
foreign and domestic countries will allow the development of housing demand that will
automatically increase the demand of the economy. Long run policy of migration and education
that will be taken by government will determine the development of demand through the
improved level of the housing and more people will come if the economy is going to have more
number of employees who are willing to work in the manufacturing sector of the economy.

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Investigating Economic Issues
Conclusion
The whole study has come to conclusion that in order to improve the development of
economic growth investment in the housing sector is important. More and more foreign direct
investments will come to the economy if the number of housing will increase and it has
definitely increased the development of the resource development. Through the capitalization on
the development of resource will definitely allow the incorporation of better involvement in the
economy. The housing economy will happily invest and will be developing the factors of
production that will increase the return of house that will improve the development of economy.

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Investigating Economic Issues
Reference list
ABC News. (2017). Four reasons why Australia's property market is riskier than Canada's.
[online] Available at: https://www.abc.net.au/news/2017-12-11/australian-real-estate-vulnerable-
to-variable-interest-rates/9237202 [Accessed 6 May 2019].
Abs.gov.au. (2019). 6416.0 - Residential Property Price Indexes: Eight Capital Cities, Dec
2018. [online] Available at: https://www.abs.gov.au/ausstats/abs@.nsf/mf/6416.0 [Accessed 6
May 2019].
Abs.gov.au. (2019). Housing - Australian Bureau of Statistics. [online] Available at:
https://www.abs.gov.au/housing [Accessed 6 May 2019].
Bentley, R.J., Pevalin, D., Baker, E., Mason, K., Reeves, A. and Beer, A., 2016. Housing
affordability, tenure and mental health in Australia and the United Kingdom: a comparative
panel analysis. Housing studies, 31(2), pp.208-222.
Dufty-Jones, R. and Rogers, D. eds., 2015. Housing in 21st-century Australia: people, practices
and policies. Ashgate Publishing, Ltd..
Fool.com.au. (2019). Expert warns why Australia has one of the riskiest housing markets in the
world | Motley Fool Australia. [online] Available at: https://www.fool.com.au/2018/09/17/this-
expert-warns-australia-has-one-of-the-riskiest-housing-markets-in-the-world/ [Accessed 6 May
2019].
The Conversation. (2018). Australia's foreign real estate investment boom looks to be over. Here
are five things we learned. [online] Available at: https://theconversation.com/australias-foreign-
real-estate-investment-boom-looks-to-be-over-here-are-five-things-we-learned-97460 [Accessed
6 May 2019].

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Investigating Economic Issues
The relationship between house prices and demographic variables | An Australian case study |
International Journal of Housing Markets and Analysis | Vol 9, No 4. (2019). International
Journal of Housing Markets and Analysis, [online] p. Available at:
https://www.emeraldinsight.com/doi/abs/10.1108/IJHMA-02-2016-0013 [Accessed 6 May
2019].