I am unsure whether my answer is adequately answering the question. Please read and make comments:

Below is the case study of the task I am working on:

Economic and Legal Context for Financial Planning (FPC001B) Case study: Purchasing a property and investing Instructions to students You are required to use the case study as the basis for the Analysis Task. Ensure you spend sufficient time familiarising yourself with the content of the case study. Jane McDonald is a 28-year-old solicitor at a prestigious law firm in Sydney. Jane rents a studio apartment near the Sydney central business district, paying $650 per week. She estimates her other living expenses amount to $24,000 per annum. She has an income of $95,000 per annum after tax. She has a balance in her savings account of $80,000, which she has accumulated since commencing full-time work at the age of 23. She owns a late model 2016 Honda Civic and has no plans to purchase a new car. She has a credit card with a limit of $5,000, which she fully pays off each month. Recently, Jane received an inheritance from her grandmother of $150,000. Jane is unsure what to do with these funds. She has always entertained the hope that one day she would be able to buy a property of her own, rather than paying, as she puts it, 'dead-end rent'. However, until recently this seemed an impossible dream. Jane comes to you for advice relating to the following objectives: Is she able to buy her own property? Is it the right time to buy a property? Should she invest her cash elsewhere? Jane is most concerned about making any decisions in light of the following factors, which have been topics of discussion amongst friends and colleagues: 1. Labour market conditions 2. Interest rate environment 3. Global economic influences on the Australian economy 4. Local property market conditions 5. Global and domestic equity market performance

Question 1 is as follows:

Question 1(20 marks| Word limit: 750)

Impact of economic variables and government policies

Note: Please refer to the case study to answer the question below.

The case study mentions five (5) factors that Jane is concerned about.

For each factor listed, you are required to provide:

1.A description of the factor, covering the current market environment applicable to that factor.

2.A focused explanation of how that factor has an influence on one (1) of Jane's investment objectives of your choosing.

3.In general terms, an explanation of how monetary and fiscal policy changes could also influence the chosen objective.

Hints:

Your answer should have five parts - one for each factor mentioned in the case study.

Each factor/part should then be broken down into the elements 1-3 above; accordingly. For full marks, you will need to provide 5 lots of 3 elements (15 elements total) in your answer.

You should note the word limit and apply the limit evenly across the five factors.

My Answer

1 Labour Market

Description

The Business Dictionary defines the Labour Market as the market where workers find paying work, employers find will workers and wage rates are determined.

Impact

We are currently living in a COVID 19 world.The National Skills Commision recently published a paper called, "Snapshot in time The Australian Labour Market and COID 19". In this report the Reserve Bank is quoted as expecting unemployment to continue to be high 8.5% in June 2021. According to the ABS unemployment was 7.5% in July 2020.This compares to July 2019 when unemployment was steady at 5.2%.

Government Fiscal Policy and RBA Monetary Policy.

With a soft labour market such as we have at the moment labour costs are not expected to jump.The RBA has stated that a wage growth of less than 4% contributes to low inflation and low inflation will mean that interest will not need to rise to combat inflation. Therefore interest rates are not expected to rise and therefore your mortgage repayments will not increase as a consequence.

2. Interest Rate environment

Description

Interest is a charge that lenders make to borrowers to compensate them for transferring the use of their funds. Lenders expect repayment of their funds and additional money (interest) for granting this use. Interest rates are impacted by supply and demand. Interest rates can be regarded to have four components:

Real: represents the compensation the lender charges for not having use of the funds

Inflation compensation: rate to compensate the lender in loss of purchasing power

Risk premium: represents the lenders assessment of possible default by the borrower

Monetary policy: reflects the stance of the RBA

The RBA sets cash rate and this has a cascade effect on all interest rates in Australia including home mortgages.It implements its policy by buying and selling repos.The current official RBA short term rate is 0.25%.The RBA Governor, Philip Lowe in his August 2020 media release stated that unemployment is expected to decline to be around 7% and due to the spare capacity in the economy inflation is expected to be around 1 -1.5%.He then went on to state that the board will not increase interest rates until a drop in unemployment and inflation is sustainable within the 2-3% target.

Impact

It therefore follows that interest rates are projected to remain low over the next couple of years.

At current interest rates a $600,000 30 year loan would attract a weekly repayment of $604, which is less than you are currently paying in rent.

Government Fiscal Policy and RBA Monetary Policy.

Should inflation jump quicker than expected interest rates may rise and this increase in inflation would cause an increase in interest rates and effect your affordability.

3. Global economic influences on the Australian economy

Description

Technology and deregulation have driven globalisation.Global events impact on the Australian economy.An example of this is the impact that the US sub prime crisis of 2007 had on Australia.Although the Australian market is very different to the US market the failure of the US sub prime saw mortgage lenders such as RAMS in Australia have trouble rolling over debt as capital markets the world over were adversely impacted by the GFC.

Impact

Australia has a long history of importing capital and as a consequence US interest rates impact Australian interest rates.

Government Fiscal Policy and RBA Monetary Policy.

US Fed Chairman, Mr Jerome Powell said recently, " We're not thinking about raising rates.We're not even thinking about thinking about raising rates".

The US has no intention to raise interest rates for quite some time so one could assume that global forces will not cause Australia to increase interest rates which would adversely impact your ability to buy your property.

4. Local Property Market conditions

Description

Price is inversely related to demand.The less demand that there is for housing the lower likelihood for housing to increase in price.Sydney auction clearance rates are currently 66% whilst clearance rates in 2019 were 78%.Good auction clearance rates are 70 to 75%.

Impact

It therefore follows that higher unemployment is leading to a softer real estate market.A softer market will mean that prices are less likely to rise.

Government Fiscal Policy and RBA Monetary Policy.

The Federal government is choosing to pursue an expansionary fiscal policy by increasing government expenditure on goods and services.It is introducing stimulus policies designed to reduce unemployment and to stimulate the economy.A reduction in unemployment will see demand for housing increase.This coupled to low interest rates may cause housing to increase once unemployment has reduced.

5. Global and domestic equity market performance

Description

Equity markets are places where people can buy and sell securities.They bring together savings and the demand for capital. Financial intermediaries are the channel for these funds to flow between the two.A major goal of equity markets is to achieve a wide range of buyers and sellers in doing so ensuring liquidity is available without undue disturbance on the market price.

Impact

The current COVID 19 crisis that is impacting equity markets.Equity markets are a reflection of economic activity and the movement between peak and trough of the business cycleare of growth and contraction economically.The COVID crisis is causing a contraction in GDP and markets have comeback somewhat.Equity markets present an option for you to invest.We are currently experiencing under use of capacity in labour and industrial production.This typically will mean that th market has not reached its trough.

Government Fiscal Policy and RBA Monetary Policy.

government stimulus is attempting to combat this.Typically housing activity will increase as economically we move to expansionism.This will mean that house prices as well as well as the equity market will increase should these measures prove successful.