Financial Issues of Reserve Bank of Australia, Mercury Capital - Assignment Example

The paper "Financial Issues of Reserve Bank of Australia, Mercury Capital " is a great example of a finance and accounting assignment. The Reserve Bank of Australia (RBA) is directly responsible for the underlying stability of the overall financial system of the country. It conducts the financial system functionalities that include; settlement function, the flow of funds function; risk-transfer function; the overcoming information asymmetry, restricting incentive-related issues as well as engages in the pooling of funds.

According to an article titled; ‘House Prices Soared after RBA Misjudged Market’ by The Australian, the author notes that the Reserve Bank of Australia misjudged the risks associated with the housing market when it engaged in cutting of the rates twice in 2016. The successive cutting down of the rates played a significant role in pushing housing prices even far-much higher to outdo the degree of supply bottlenecks for which both the bank and government places most of the blame. The cutting down of the rates to 1.5 per cent posed an imminent danger to the economy as there was a growing supply of apartments within the capital cities while still experiencing the falling of the mortgage lending base. As a result of this action, the economy is expected to be facing a probable bubble that is being inflated. Certainly, within the housing market, the aspects related to supply constraints and tax incentives for property investors have both contributed immensely to the market heat currently being faced in Sydney and Melbourne. The action above can be connected with Hunt and Terry (2015) notion of RBA playing the role of a risk-transfer function, which seeks to establish a balance between surplus and deficit units.

Question 2

2a)

Mercury Capital was established in 2010 and operates as a mid-market private equity company. It is managed directly by a Sydney-based team that is currently managing approximately AUD $ 400M in terms of committed funds that further includes; at least A$120M Mercury Capital No.1 Fund as well as A$300M Mercury Capital Fund 2 (Mercury Capital, n,d). It is crucial to note that Mercury Capital is directly engaged in long-term investment opportunities in both Australia and New Zealand-based private businesses that have an enterprise value of between $50M and $200M. To qualify for the funds, a business is expected to be a leader in its area of operations/sector, enjoys a high-quality management team; has fairly-developed and scalable systems while still is able to demonstrate the possibility of achieving a robust and sustainable set of growth.