Ethical Context Report: Analysis of Economic Factors in Australia

This report provides an analysis of the ethical context surrounding various economic factors in Australia, focusing on their impact on property investment decisions. It examines five key factors: labour market conditions, interest rate environment, global economic influences, local property market conditions, and global/domestic equity market performance. The report details the description, impact, and government policy implications of each factor, drawing on data and forecasts to assess the feasibility of property ownership. The analysis considers how factors like wage growth, interest rates, global economic conditions, and equity market performance influence investment decisions and overall economic stability. References to relevant sources support the analysis, providing a comprehensive overview of the ethical considerations within the Australian economic landscape.

Running head: ETHICAL CONTEXT
Ethical Context
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ETHICAL CONTEXT
Table of Contents
Factor 1: Labour Market Conditions...............................................................................................4
Description...................................................................................................................................4
Impact..........................................................................................................................................4
Government Policy......................................................................................................................4
Factor 2: Interest Rate Environment................................................................................................5
Description...................................................................................................................................5
Impact..........................................................................................................................................5
Government Policy......................................................................................................................6
Factor 3: Global Economic Influences on the Australian Economy...............................................6
Description...................................................................................................................................6
Impact..........................................................................................................................................6
Government Policy......................................................................................................................7
Factor 4: Local Property Market Conditions...................................................................................7
Description...................................................................................................................................7
Impact..........................................................................................................................................7
Government policy......................................................................................................................7
Factor 5: Global and Domestic Equity Market Performance..........................................................8
Description...................................................................................................................................8
Impact..........................................................................................................................................8
Government Policy......................................................................................................................8
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Factor 1: Labour Market Conditions
Description
Housing tenure varies based on the demographic factors, current economic trends, employment
status as well as wage earning status (Frogner, 2002). Labour cost in future is forecasted to
decrease from 99.80 (2017) to 97.62 index points (Trading Economics, 2017). Therefore, the
labour market conditions can be considered favourable in accordance with the ability of Jane to
buy her own property.
Impact
The factors of labour market conditions, earnings, intensity to search for a job and mobility play
an important role in the task of owning a property (Frogner, 2002). Corresponding to the labour
market conditions, wage growth rate is forecasted to increase from 1.90% to 3.3% in the future.
Therefore, it is really favourable for Jane to invest in her own property because her ability to
purchase and bear its costs will be much easier with continuous increase in the wage rate
(Trading Economics, 2017).
Government Policy
Correspondingly, any loosening of fiscal or monetary policy in future will increase the housing
prices (Parliament of Australia, n.d.). This shall not be feasible for Jane and hence the recent
scenario can be regarded as a correct time to purchase her own property. Apart from property
investments, Jane can invest in managed funds and shares despite commercial real estate
investment being most feasible (Pickworth, 2017). However, investing elsewhere apart from
property is risky and since Jane does not have a backup in case of any loss on her investment, it
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ETHICAL CONTEXT
is a better option for her to buy the property rather than staying there on rent, which may turn out
to be comparatively expensive in nature (Parliament of Australia, n.d.).
Factor 2: Interest Rate Environment
Description
Since, the interest rate environment is affected by low inflation, less difference can be found
between the policy rates and housing loan rates. Therefore, as per the feasibility as well as fiscal
and monetary policy changes, the interest rate environment can be considered favourable for
Jane to purchase her own property. In the near future, the home loan might become overtly
expensive and hence the first time buyers of properties might be at a comparatively advantageous
position (Corderoy, 2017). Hence, the most feasible decision for Jane is to buy her own property
based on the additional advantage.
Impact
The 2017 interest rate is 1.50% and the future forecast is 3% along with the residential
ownership rate, which will probably decrease in the future (Trading Economics, 2017). It is
really a good time to buy one’s own property because of the favourable interest rate
environment. Therefore, her ability to buy a property with lower interest rate of housing and loan
has made the conditions even more favourable for Jane. This shows that labour market
conditions have a positive impact on the housing decisions of Jane. Therefore, it can be inferred
that the rise in interest rate may lead to the increase in the tenant rent, thereby leading Jane
towards a stricter decision-making on the purchase of her own property (Beresford, 2017).
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Government Policy
Therefore, as per the feasibility along with the changes in fiscal and monetary policy, the interest
rate environment is observed to be favourable for the purchase of Jane’s own property. As per
the government policies, the fiscal expenditure is forecasted to decrease in future from AUD
37,475 million to 36,685 million (Trading Economics, 2017). As it was observed that low
housing loan rate of interest has been decreasing the interest rates of the policy of Reserve Bank
in turn results in the environment of low inflation (Parliament of Australia, n.d.). Thus, it has
made the current environment favourable to invest in the domain of housing.
Factor 3: Global Economic Influences on the Australian Economy
Description
Global economy influences the Australian economy prominently through the macro-environment
conditions. For instance, the depression of 1930s as well as in 1970s was the inflation that
affected not only the global but the Australian economies (Macfarlane, 2005).
Impact
As a result of these global economic conditions, a state of imbalance was apparent in the
Australian economy with constant increase in the housing prices and debts a (Macfarlane, 2005).
However, in the recent context, it was not fully affected by the financial crisis in Asian and
global economies, which was possible through proper management. Although there is a risk of
fall in the property prices as compared to the historic data, there is a great feasibility evident in
the property ownership for Jane (Janda, 2017).
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ETHICAL CONTEXT
Government Policy
Monetary and fiscal policy is thus formulated based on the changes in the global economy and
their possible impact in the Australian economy through the implementation of critical analysis
procedure and statistical measures (Macfarlane, 2005).
Factor 4: Local Property Market Conditions
Description
Based on the global conditions and its impact on the local property, it can be stated that market
conditions shall also affect the decisions of Jane for their investment. In the recent context,
Melbourne and Sydney have been facing inflation, which is the ultimate result of increased
demand in the property market (Condon, 2017).
Impact
The impact of this overheated Australian economy poses a tremendous impact on the
affordability of the people particularly in the domain of housing. In addition, their choices
relating to investing in the purchases or renting creates an environment of uncertainty as per the
decision making similar to Jane (Condon, 2017).
Government policy
Therefore, conclusions can be drawn based on the government policies affecting the local
property market conditions such as increasing or decreasing the housing price rates among others
(Condon, 2017).
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Factor 5: Global and Domestic Equity Market Performance
Description
Equity market has affected the Australian economy, which indirectly or directly poses an impact
on the purchasing decisions of the citizens. Gaps between debt and earning yields have also been
observed which suggested that merger and acquisition activities must be increasingly facilitated
to stabilize the economy (Potter, 2017).
Impact
These gaps are not favourable because there was an increase in the value stocks prices and
quality, which in turn results in the rise of interest rates (Potter, 2017). This shall also have
negative impacts on the investment decisions of Jane, wherein her objectives shall not be
fulfilled as expected.
Government Policy
Posing an impact on the equity market performance, the global policy has become unsustainably
low and has started to deflate. Therefore, there tends to be evident instances of uncertainty in the
policy making (Potter, 2017).
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References
Beresford, 2017. Will interest rates hit 10%? , Property Investor, viewed 20 September 2017,
<http://www.apimagazine.com.au/property-investment/will-interest-rates-hit-10-percent>.
Condon, T 2017. Heated house market hits a ceiling in Sydney and Melbourne, The Australian,
viewed 20 September 2017, <http://www.theaustralian.com.au/news/inquirer/heated-house-
market-hits-a-ceiling-in-sydney-and-melbourne/news-story/
08a7b3f7cdb2feecfbcb15dd82746358>.
Corderoy, J 2017. Rising interest rates will cool property market, Finance, viewed 20 September
2017, <http://www.news.com.au/finance/real-estate/buying/rising-interest-rates-will-cool-
property-market/news-story/54bd7bf83fd012cd706de626cc74b262>.
Frogner, Mari L 2002, ‘Housing tenure and the labour market’, National Statistics Feature, pp.
523-534.
Janda, M 2017. Australia's economy: The Murphy's Law forecast for 2017, ABC, viewed 20
September 2017, <http://www.abc.net.au/news/2017-01-06/murphys-law-guide-to-australian-
economy/8163918>.
Macfarlane, I.J 2005, ‘Global influences on the Australian economy’, Reserve Bank of Australia,
pp. 1-6.
Parliament of Australia, n.d., Chapter 4 - Factors influencing the demand for housing, Former
Senate Committees, viewed 18 September 2017,
<http://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Former_Committees/hsaf/
report/c04>.
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Pickworth, C 2017, Experts reveal where you should be investing your cash, Finance, viewed 18
September 2017, <http://www.news.com.au/finance/money/wealth/experts-reveal-where-you-
should-be-investing-your-cash/news-story/b99503c7bde9191f91d976e21b5a98b4>.
Potter, B 2017. 2017 Australian equity market outlook, Nikko AM Limited, viewed 20
September 2017, <http://www.nikkoam.com.au/adviser/articles/2017/02/2017-australian-equity-
market-outlook>.
Trading Economics 2017. Australia | Economic Forecasts | 2017-2020 Outlook, Trading
Economics, viewed 20 September 2017, <https://tradingeconomics.com/australia/forecast>.
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