Australian Office of Financial Management
Michael Allen
March 2001
Introduction
Commonwealth financing task
AOFM’s 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 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
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
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
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
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
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
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
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
-
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
Conclusion
Reduced Commonwealth financing task
Potential for further decline in relative liquidity
AOFM to provide regular updates
