Australian Office of Financial Management
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Michael Allen
March 2001
Introduction
- Commonwealth financing task
- AOFM's role
- AOFM funding activity
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.
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
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
