Essays on Inflated Asset Prices in Australia Case Study

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The paper "Inflated Asset Prices in Australia" is a good example of a macro & microeconomics case study. Discussions on the affordability of housing in Australia have laid blame on the effects of the failure of markets. Particularly, the market that focuses its attention on the sector of private rental and issues relating to housing distribution in residential areas, even if this could be the case there are also other factors that cannot be left aside such as those that lead to inflated prices in the real assets and the changes brought about by excessive demand of housing especially in residential areas.

The housing market has been seen to contribute significantly to the economic growth in Australia in the recent past as more and more residential houses continue to construct in urban areas. The rise in housing prices has a positive relationship with consumption where consumption accounts for about 60% of the economy’ s aggregate demand. Therefore a rise in housing prices leads to a rise in consumption level and conversely a fall in housing prices leads to a fall in consumption. Introduction The main focus of this report will be based on the several economic effects related to the affordability of housing.

The main aim of this report being the development of policies that can help solve the economic problems related to housing. Housing affordability in this context is being considered as a matter relating to national as well as the regional economies rather than a matter of social policy. The issue of housing is pointed out by traditional theory on public finance (Musgrave, 1959). focuses on three distinct fields the state needs to intervene; that is stabilization, distribution and housing allocation.

These fields form the basis whereby the government can intervene to correct the failures and the imperfections brought about by the markets. Australian price inflation on houses has been caused by a number of factors that include; rural-urban migration, an increase in population growth and the increase in the level of income.

References

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Dornbusch, R. and Fischer, S. (1987). Macroeconomics. New York: McGraw-Hill.

Gordon, R. (1964). Business Fluctuations. New York: Harper and Row.

Haugen, R. (1995). The New Finance: The Case against Efficient Markets. Englewood Cliffs: Prentice-Hall.

Leung, C. (2004). ‘Macroeconomics and housing: a review of the literature', Journal of Housing Economics 13: 249-267.

MacLennan, D.( 2004). 'Housing Policies: New Times, New Foundations. York: Joseph Rowntree Foundation.

Modigliani, F. and Blumberg, R. (1954). Utility analysis and consumption: An interpretation of cross-section data', in K. Kurihara (ed) Post-Keynesian Economics. New Brunswick, NJ: Rutgers University Press.

Musgrave, R (1959).The Theory of Public Finance: A Study in Public Economy. New York: McGraw-Hill.

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