Chris Joye on Aussie QE:
Because most of our borrowers pay “variable” as opposed to “fixed” rates of interest, the cost of borrowing in Australia prices off short-term (variable) rather than long-term (fixed) interest rate benchmarks. In the US during the crisis, the Federal Reserve bought long-dated government bonds to reduce the risk-free rate that America’s 30-year fixed-rate home loans price off. Doing so in Australia would lower bank funding costs (by slashing their benchmark rates), and translate into cheaper money for fixed-rate borrowers.
…The RBA already accepts AAA rated RMBS as collateral when lending to counterparties through its repurchase, or repo, arrangements, which was a change introduced during the crisis that substantially improved the liquidity of, and thus the demand for, these securities.
