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Australian Office of Financial Management Michael Allen March 2001
23

Australian Office of Financial Management Michael Allen March 2001.

Mar 26, 2015

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Page 1: Australian Office of Financial Management Michael Allen March 2001.

Australian Office of Financial Management

Michael Allen

March 2001

Page 2: Australian Office of Financial Management Michael Allen March 2001.

Introduction

Commonwealth financing task

AOFM’s role

AOFM funding activities

Page 3: Australian Office of Financial Management Michael Allen March 2001.

Commonwealth

Government Financing

Task

Page 4: Australian Office of Financial Management Michael Allen March 2001.

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.

-10

-5

0

5

10

15

20

25

1995-96Actual

1996-97Actual

1997-98Actual

1998-99Actual

1999-00Actual

2000-01Budget

Esitmate

2000-01MYEFO

2001-02MYEFO

2002-03MYEFO

2003-04MYEFO

$ billion

Page 5: Australian Office of Financial Management Michael Allen March 2001.

Commonwealth Government Debt

Page 6: Australian Office of Financial Management Michael Allen March 2001.

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

Page 7: Australian Office of Financial Management Michael Allen March 2001.

OECD Net Debt

Page 8: Australian Office of Financial Management Michael Allen March 2001.

0.0

20.0

40.0

60.0

80.0

100.0

120.0

Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00

Commonwealth

State

Corporate

CGL Market Outstandings

Page 9: Australian Office of Financial Management Michael Allen March 2001.

Role of the

Australian Office of Financial

Management

Page 10: Australian Office of Financial Management Michael Allen March 2001.

AOFM

AOFM established 1 July 1999

Debt management responsibility

Prudent Sovereign Debt manager

Page 11: Australian Office of Financial Management Michael Allen March 2001.

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

Page 12: Australian Office of Financial Management Michael Allen March 2001.

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

Page 13: Australian Office of Financial Management Michael Allen March 2001.

AOFM

Policy constraints

Market liquidity

Risk free pricing benchmark

Commercial constraints

Page 14: Australian Office of Financial Management Michael Allen March 2001.

Debt Management Responsibility

Debt issuance

Risk management

Cash management

General Government interest calculations

Market communication

Page 15: Australian Office of Financial Management Michael Allen March 2001.

Funding Strategy Objectives

Prudent

Benchmark Portfolio

Flexible strategies

Investor demand

Liquidity premium

Market efficiency

Page 16: Australian Office of Financial Management Michael Allen March 2001.

AOFM Funding

Activities

Page 17: Australian Office of Financial Management Michael Allen March 2001.

Debt Maturity Profile

0123456789

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2015

-16

2020

-21

0123456789

Bonds TIBs

Face value ($b) Face value ($b)

Note: Excludes Treasury Notes

Page 18: Australian Office of Financial Management Michael Allen March 2001.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Bonds TARBS IndexedLinked

T - Notes International Other

1991

2000

%

Change in Funding Source

Page 19: Australian Office of Financial Management Michael Allen March 2001.

T-Note Funding

-6

-4

-2

0

2

4

6

8

10

12

-6

-4

-2

0

2

4

6

8

10

12

$b

Estimated Commonwealth Cash Balances

September December March June

$b

1999/2000

2001/2002

Page 20: Australian Office of Financial Management Michael Allen March 2001.

Other Funding

Index Linked– fixed issuance dates– $300m 2000/2001 issuance

Floating Rates Bonds– No new issuance

Page 21: Australian Office of Financial Management Michael Allen March 2001.

Bond Market Funding

Focus on liquidity

Target long dated maturities

Regular tender program

$3 - $4 bn 2000/2001 issuance

Page 22: Australian Office of Financial Management Michael Allen March 2001.

-

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Jan-01 Nov-01 Mar-02 Oct-02 Aug-03 Sep-04 Jul-05 Feb-06 Nov-06 Oct-07 Aug-08 Sep-09 Jun-11 May-13

Bond Market Maturity Profile

Page 23: Australian Office of Financial Management Michael Allen March 2001.

Conclusion

Reduced Commonwealth financing task

Potential for further decline in relative liquidity

AOFM to provide regular updates