Australian Office of Financial Management Michael Allen March 2001
Introduction Commonwealth financing task AOFMs role AOFM funding activities
Commonwealth Government Financing Task
Headline Cash Balance* * Following recent changes in the Australian National Accounts Standards, the underlying and headline cash balance estimates in the chart from onwards include payments by the Commonwealth in respect of accumulated PTE superannuation liabilities.
Commonwealth Government Debt
Fiscal Context Government set out in Budget –a managed reduction in CGS –not to the full extent of projected reduction in net debt –maintain liquidity in benchmark lines Formal market updates
OECD Net Debt
Commonwealth State Corporate CGL Market Outstandings
Role of the Australian Office of Financial Management
AOFM AOFM established 1 July 1999 Debt management responsibility Prudent Sovereign Debt manager
AOFM Australia among the leaders in the OECD in pursuing a complementary focus on reform of public sector financial management –Charter of Budget Honesty –Accrual budgeting, reporting and accounting
AOFM sovereign debt management is a business exposed to a variety of financial risks –fiduciary responsibility to taxpayers critical distinctions between sovereign and corporate sector
AOFM Policy constraints Market liquidity Risk free pricing benchmark Commercial constraints
Debt Management Responsibility Debt issuance Risk management Cash management General Government interest calculations Market communication
Funding Strategy Objectives Prudent Benchmark Portfolio Flexible strategies Investor demand Liquidity premium Market efficiency
AOFM Funding Activities
Debt Maturity Profile Note: Excludes Treasury Notes
Change in Funding Source
T-Note Funding
Other Funding Index Linked –fixed issuance dates –$300m 2000/2001 issuance Floating Rates Bonds –No new issuance
Bond Market Funding Focus on liquidity Target long dated maturities Regular tender program $3 - $4 bn 2000/2001 issuance
Bond Market Maturity Profile
Conclusion Reduced Commonwealth financing task Potential for further decline in relative liquidity AOFM to provide regular updates