Macroeconomics Falling Rates of Unemployment

Question: Discuss about theMacroeconomics for Falling Rates of Unemployment. Answer: Surging Housing Pricesin Australia The property bubble in Australia is an ongoing debate that deals with the fact that whether the property market in Australia is significantly overpriced. The reasons behind surging housing prices in Australia are as follows: High rates of unemployment and falling rates of unemployment is considered as one of the major factor that leads to surging housing prices in Australia. The rate of unemployment has surged to 6.4 percent with a loss of 12,200 estimated jobs. The loss of jobs in turn led to pressure on wages. The steep increase in the rate of unemployment caused an evenly sharp decline in the Australian dollar. On the other hand, an unexpectedly large number of new part time jobs have pulled down the rate of unemployment to 5.7 percent. As a result, the total number of individuals with jobs increased by 26,200 (Knoll, Schularick and Steger 2014). Immigration had also led to surging housing prices as the injection of migrants that surge the short run demand has contributed to the rise in the price of houses. Housing prices are therefore likely to lead to increase in the near future in the presence of migration shocks. The abundant increase in supply of houses has given homebuyers several choices that slowed down the possibility of a rapid property boom. However, immigration into Australia could be threatened if higher house prices continued in the future (Gurran and Phibbs 2013). The latest surge in Australian housing prices is due to local buying that comprises first homebuyers. However, increasingly young individuals in Australia are unconstructively gearing investment properties. As a result, it has become modern fashion for youth to be investors rather than first home purchasers. On the other hand, most of the overseas buyers are not searching for micro apartments rather they prefer houses. With the high level of speculative demand, the housing prices will continue to surge in Australia. Apartment buyers mostly rent the property out. The high increase construction boom in Australia is starting to affect the values of the apartments (Gustafsson, Stockhammar and sterholm 2016). Inflation also leads to surging housing prices in Australia. The increase in consumer prices is likely to increase the healthcare costs that will increase the rate of inflation. The strong increase in the healthcare cost will surge the housing prices in Australia. The rate of interest slashed that made the mortgages incredibly cheaper. The house prices have jumped to 6.5 percent that is nine times the rate of inflation in Australia (Downes, Hanslow and Tulip 2014). The unreserved supply of money causes house prices to surge. The newly created debt pushed up prices that is related to unexpected lose lending. This in turn led to national fascination where financial assets were considered the place to live rather than houses. Macroeconomic Solutions There are various macroeconomic problems that require to be eliminated and as a result, such macroeconomic problems require solution to the problem that they pose. Macroeconomic solution will help to provide stability in the level of price that will help to analyze the fluctuation in the business. With the help of this, the government will come across the policies that will provide measure to control inflation and deflation. It will also help to identify the causes that leads to the problem related to acquiring the affordable housing (Urhammer and Rpke 2013). It is important to make housing affordable for the not-so-wealthy individuals that are a major concern for most of the people. There are various reasons that require to be concerned with affordable housing. Macroeconomic solutions the government can undertake to ensure affordable housing for the younger generation are as follows: First time homebuyer scheme: The government can provide equity loan to the younger generation who requires to purchase a new build home. As the generation is younger, the government requires to keep the price less than 600,000. With the help of this scheme, the younger generation will be able to borrow 20 percent of the acquisition price interest-free for the first five years. After the five years, the borrower will be charged a fee of 1.75 percent of the value of the loan. The younger generation will also be able to make the use of shared ownership with the help of which the individual will acquire a share of a home from the property owner who is generally the council. This scheme had ensured affordable housing for the younger generation. The younger generation who are desiring to purchase a home will be able to have a loan of 40 percent of the cost from the government as long as they can put up a 5 percent deposit double the preceding limit. The first-time buyer usually indicates d iverging out rent as well as saving for a deposit with ever-increasing house prices all at the same time. With the help of the equity loan scheme, the buyers should find a deposit of at least 5 percent of the property value. The loan will be repaid by the younger generation during the first 25 years at any time that they desire (Forrest and Murie 2014). 2. Entrepreneurship: Governments require to bring into line diverse and mutual service models with new opportunities for growth. Innovation is primary to high-performing governments as well as businesses that offer the potential to accomplish better social outcomes for citizen that will lead to continued economic recovery. It is important to create space for entrepreneurs to turn ideas into market prospects. If the government encourages youth entrepreneurship, it will boost competitiveness as well as employment. Young entrepreneurs have the potential to construct a new economic dynamic that will generate growth and jobs. With the increase in youth entrepreneurship, the younger generation will be able to earn that will facilitate them to purchase affordable houses (Dorling 2014). Social housing for the poor: The government is also likely to provide affordable housing with cabinet approval. The various schemes and policies that will be provided by the government will help to provide housing for the poor. Social housing is also referred to as public housing in which the property is owned by a government authority that may be either central or local. It is a sort of rental housing that requires to be provided by the government to the younger generation (Kadi and Musterd 2015). The rental housing is mainly owned and administered by the state or by non-profit organization or by a combination by two. Social housing also acts as a potential remedy for the inequality of housing. The common objective of social housing is to provide affordable housing to the younger generation who are unable to purchase a new house. Departments of state governments mainly provide social housing in Australia with funding provided by both the state government and the federal government. As per the report, there are more than 300,000 public housing abodes in Australia that mostly consists of housing of low-density on master-planned states. The social housing is mainly used to provide relief to the younger generation who are homeless. The government had launched Housing for all by 2022 scheme that is surfacing the way for reasonably priced house to the younger generation at low rate of interest (Gilbert 2014). Taking action to foreign investor: A mortgage is viewed as a stream of future cash flows that is brought, sold as well as stripped in the secondary mortgage market. The foreign investor requires mortgage market that is extremely large as well as liquid. This will in turn help the younger generation to have an affordable housing, as they will be able to use it to fund close loan. If the mortgage is not used simultaneously in the secondary market, the borrowers will lock the interest rate. With the increase in the number of younger generation that mostly includes university and college students, the requirement for affordable housing has also increased. The young students mainly search for the housing that is affordable as well as inexpensive (Moosa 2016). References Dorling, D., 2014.All that is solid: How the great housing disaster defines our times, and what we can do about it. Penguin UK. Downes, P., Hanslow, K. and Tulip, P., 2014.The effect of the mining boom on the Australian economy. Reserve Bank of Australia. Forrest, R. and Murie, A., 2014.Selling the welfare state: The privatisation of public housing. Routledge. Gilbert, A., 2014. Housing the urban poor.The companion to development studies, pp.257-262. Gurran, N. and Phibbs, P., 2013. Housing supply and urban planning reform: the recent Australian experience, 20032012.International Journal of Housing Policy,13(4), pp.381-407. Gustafsson, P., Stockhammar, P. and sterholm, P., 2016. Macroeconomic effects of a decline in housing prices in Sweden.Journal of Policy Modeling,38(2), pp.242-255. Kadi, J. and Musterd, S., 2015. Housing for the poor in a neo?liberalising just city: Still affordable, but increasingly inaccessible.Tijdschrift voor economische en sociale geografie,106(3), pp.246-262. Knoll, K., Schularick, M. and Steger, T.M., 2014. No price like home: Global house prices, 1870-2012. Moosa, I., 2016.Foreign direct investment: theory, evidence and practice. Springer. Urhammer, E. and Rpke, I., 2013. Macroeconomic narratives in a world of crises: An analysis of stories about solving the system crisis.Ecological Economics,96, pp.62-70.