Commonwealth Debt Management

20 March 2001

Michael Allen
March 2001

Australian Office of Financial Management

Introduction

 

  • Commonwealth financing task
  • AOFM’s role
  • AOFM funding activity

 

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Commonwealth Government Financing Task

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 1998-99 onwards include payments by the Commonwealth in respect of accumulated PTE superannuation liabilities.

Headline Cash Balance

Commonwealth Government Debt

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

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OECD Net Debt

OECD Net Debt

CGL Market Outstandings

CGL Market Outstandings

Role of the Australian Office of Financial Management

Role of the Australian Office of Financial Management

AOFM

  • AOFM established 1 July 1999
  • Debt management responsibility
  • Prudent Sovereign Debt manager

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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

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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

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AOFM

  • Policy constraints
  • Market liquidity
  • Risk free pricing benchmark
  • Commercial constraints

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Debt Management Responsibility

  • Debt issuance
  • Risk management
  • Cash management
  • General Government interest calculations
  • Market communication

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Funding Strategy Objectives

  • Prudent
  • Benchmark Portfolio
  • Flexible strategies
  • Investor demand
  • Liquidity premium
  • Market efficiency

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AOFM Funding Activities

AOFM Funding Activities

Debt Maturity Profile

Note: Excludes Treasury Notes

Debt Maturity Profile

Change in Funding Source

Change in Funding Source

T-Note Funding

T-Note Funding

Other Funding

  • Index Linked
    • fixed issuance dates
    • $300m 2000/2001 issuance
  • Floating Rates Bonds
    • No new issuance

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Bond Market Funding

  • Focus on liquidity
  • Target long dated maturities
  • Regular tender program
  • $3 – $4 bn 2000/2001 issuance

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Bond Market Maturity Profile

Bond Market Maturity Profile

Conclusion

  • Reduced Commonwealth financing task
  • Potential for further decline in relative liquidity
  • AOFM to provide regular updates

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Last updated: 7 November 2013