APRA : How much further to go ?

You might be right, but it is very difficult to separate the structural change from the cyclic as the symptoms presented are the same. However in this case the government and politicians might not be able to reverse the regulations because:

• They are not initiating these changes. These changes (changed risk assessment models, higher equity requirements, long term funding) are driven by Basel and the last tranche is yet to be finalized by end 2016. The alacrity with which the banks are responding (even exceeding) to APRA requirements without a murmur is because they are in this together. Both the regulator and the banks might lose sovereign control over risk assessment and management, hence this last minute cleanup before Basel IV is finalized.
• Even if the changes are reversed, the risk rating (both Australian government and banks) might be downgraded and consequently the cost of funds as sourced in international markets will go up. Thus government intervention might end up being counterproductive

IMHO even if there are interest rate cuts in this year, the banks will not transfer them to the customers. A lot of (painful ?) lending changes will wash over till end of 2017, by when the Basel IV will (hopefully) be phased in completely. The property market in addition has to withstand the political fall out of NG and CGT, FIRB restrictions, FDI withdrawal, apartment gluts, superannuation changes etc.

 

Westpac's retreat from the foreign loans was a consequence of APRA requirements

The bank's deputy chief executive, Phil Coffey
"In the future, the capital weighting for foreign-sourced loans is going to go up materially under Basel IV and unless there is a significant repricing of these loans, the returns won't be anywhere near where they are today,"

Westpac defends foreign investor loan retreat

The argument between the bankers and the Basel IV committee continues. Following should provide some idea of what to expect from Basel IV

Euromoney Magazine