The good thing about all this attention on APRA is that people are slowing starting to understand the significance of APRA as part of our regulatory framework.
Having said that the discussion is still mostly incoherent.
Moody’s talk as though APRA (and other similar prudential regulators) are horse breakers faced with a particularly unruly steed and there is no guarantee that even a very skilled and experienced APRA could hope to control the beast.
What a load of hogwash.
APRA has all the power it needs to stop credit creation DEAD in its tracks.
No death stares, voodoo dolls, smoke signals, cuddles after midnight required.
APRA can direct the banks ANYWAY they want when it comes to credit creation.
They can specify
* The classes of people who can borrow
* How much they can borrow
* By what reference measures the amount borrowed are determined
* What is acceptable security
They can even limit overall lending to quotas.
The only reason that people are confused about the extent of these powers is the fantasy thinking that somehow credit creation in our monetary system is not political and can be managed by some magical natural economic laws.
Making APRA independent from government did not change the inherently political and arbitrary nature of its powers in a monetary system where banks are authorised to create money and the RBA is authorised to fix the overnight/ target rate.
So what does this mean?
NOTHING that is happening in relation to credit creation in Australia is an accident.
APRA is not asleep – it knows exactly what it is doing and so does the RBA.
At this moment both of them are desperately trying to reduce the risk of a property crunch as a result of the new restrictions on local bank lending to foreign buyers of OTP properties and the capital controls put in place by the Chinese government.
The only thing that some may find surprising is that there is still so much local speculator demand for credit even though the risks of the housing ponzi scheme in Australia are growing.
But that gaping and ceaseless appetite for risk is not unexpected in a country that is truly different !!