The federal government has been called upon to support liquidity in the Australian securities market in order to promote and maintain competition in the housing finance industry.
Joshua Gans of the Melbourne Business School and Christopher Joye of Rismark said in a proposal to the federal government that Australia was in need of a policy solution that would guarantee a minimum level of liquidity in the mortgage-backed securities market.
“Failure to act with a systematic policy response will see the heightened competition that emerged in the mortgage market over the past 10 years significantly dissipate,” they said.
The pair proposed that the government sponsor an enterprise similar to Fannie Mae and Freddie Mac in the US – “AussieMac” – that would leverage the government’s AAA-rating to issue low-cost bonds and acquire high-quality mortgage-backed securities from Australian lenders.
AussieMac, Messrs Gans and Joye said, would provide long-term liquidity to the market, especially during times of market failure and would “restore stability and long-term confidence to both the primary and secondary mortgage markets”.
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