Australia: Ahead of the Regulatory Curve

Which country is most ahead of the regulatory curve these days? A couple of

recent developments suggest that it might be Australia.

Datapoint One: The Australian Competition and Consumer Commission seems

ill-disposed towards Google’s proposed merger with DoubleClick, worrying

that the combined entity will have the power to crush competitors. The news

comes as we learn that Yahoo, the closest thing that Google has to

a competitor, came very close, recently, to unilateral


People familiar with the matter say that over the summer, Mr. Yang did actively

assess one major sacred cow: the Web-search-advertising business it built

up at great expense in recent years. Under the scenario discussed by top executives,

Yahoo would have outsourced that search-advertising activity — which places

small text ads next to Web search results — to either Google or Microsoft

Corp., the people say. One of these people says Yahoo raised the idea with


Datapoint Two: The Australian central bank is doing its best to shore

up the asset-backed commercial paper market, by accepting such paper in

repo transactions:

Australia’s central bank, the Reserve Bank of Australia, has relaxed rules

on collateral it will accept for short-term funding. This would enable banks

to take more time to evaluate which portions of the asset-backed commercial-paper

market are most affected by ailing subprime mortgages.

In doing so the Australians went beyond the Federal Reserve, which doesn’t

accept such paper as collateral in repo operations but did recently clarify

it was willing to accept a wide variety of such paper for its lesser-used,

and costlier, "discount window" loans to banks.

The Reserve Bank of Australia changes will begin Sept. 17 and in October will

include residential mortgage-backed securities and Australian dollar-denominated

asset-backed commercial paper. Bond yields fell sharply on the news.

This is an eminently sensible idea, and one which I hope will be copied by

other central banks around the world: it helps provide liquidity to a newly-illiquid

market without forcing the central bank into inflationary rate cuts.

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