This comment was made at Macrobusiness (link may be locked – but there is a free trial available)
APRA-man certainly has the powers required and not just the spoon bending stuff like macro prudential.
APRA-man can slow the polluted torrents of unproductive capital flooding through our borders from the currency war wastelands and eventually plug the holes tight like a little Dutch Boy. Unleashing those powers is simple as well.
1. Direct the banks to reduce their reliance on off shore lenders for residential mortgage related purposes by 5% per year. That will get the 35-40% borrowed off shore down to zero in 5-7 years.
2. Direct The AOFM to introduce a system of registered govt bonds so the owners of govt securities can be identified at any time. Then start restricting new issues to these new registered bonds and restrict ownership to locals – the SMSFS sector would love them.
The above measures will put immediate downward pressure on the $AUS and can be tightened if the effect needs to be enhanced. Increase the reduction percentage for 1 above and convert more securities to the registered type in 2.
Of course a reduced supply of predatory hot money from the currency wars may put upward pressure on interest rates but that is easily addressed.
APRA-MAN use your super powers – don’t pussyfoot around.