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Corporate Plan 2020-2021


The Corporate Plan highlights the AOFM’s core objectives and main activities for the year ahead, together with a consideration of emerging challenges and issues to be monitored and/or managed over the 2020-2024 reporting periods.

The AOFM annual corporate planning process involves: a review of its approach to managing the year in prospect; a review of the relevance of its performance indicators; and an assessment of the risks and opportunities presenting to the AOFM as at the time of the planning process. The Corporate Plan is used to guide the development of corporate project plans and annual Business Group plans, both of which set the context for individual performance expectations.

The combination of extreme financial market events during March-April 2020, and the cash management impact arising from short notice for an initial fiscal response to the COVID-19 pandemic, has created an unprecedented context for the coming AOFM work-year. The sharp increase in the financing task for 2019-20 will carry over into 2020-21. The management of liquidity risk given the scale of the adjustments to the Budget position will also require closer than usual attention throughout the year ahead. Furthermore, mobilisation of resources within the agency and the need to quickly acquire (and manage) specialised expertise to implement programs to support capital flow to the small and medium enterprise (SME) lending sector have had an impact across most of the agency. Therefore, in the near term, the focus on these challenges will significantly reduce the AOFM’s capacity to engage in activities outside core tasks.

Organisational performance against the Corporate Plan will be monitored using key performance indicators, and regular updates on the progress of achievement toward implementing major programs.

The Corporate Plan is prepared in accordance with paragraph 35(1)(b) of the Public Governance, Performance and Accountability Act 2013.


Acknowledged for excellence in sovereign financial management.

Purpose (Mission)

To fully meet the government’s debt financing and cash needs, and achieve its policy objectives to support the domestic lending market. The AOFM will take into account the potential for its operations to impact Australian financial markets.

Objectives (Delivery)

  1. Meet the Budget financing task while managing the trade-offs between cost and risks for the cash and debt portfolios over the medium-long term.
  2. Facilitate government cash outlay requirements as and when they fall due.
  3. Be a credible custodian of the Australian Government Securities (AGS) market and other portfolio responsibilities, including the Australian Business Securitisation Fund (ABSF) and Structured Finance Support Fund (SFSF).


The key functions underpinning AOFM’s role are:

  • issuing AGS to meet the government’s financing task and in accordance with government policy objectives (such as facilitating sovereign bond market liquidity);
  • managing the aggregate daily cash balances in the Official Public Account;
  • managing financial assets according to policy directives as they arise from time-to-time, or as part of broader portfolio management;
  • the settlement and payment of government financial obligations on AGS;
  • maintaining a capacity to provide specialist advice within government on debt financing (including related financial market matters) and balance sheet management;
  • developing risk assessments to undertake cost effective management of the debt and asset portfolios; 
  • where appropriate, supporting the efficient operation of the Australian financial system; and
  • supporting implementation of the ABSF and SFSF in accordance with Government policy.

Guiding principles (AOFM values)

The AOFM, as the interface between government and financial markets is required to exercise considerable judgement. It is necessary to balance the pursuit of government objectives and community outcomes with an understanding of the incentives that drive financial market participants. In this regard, it is important that the AOFM is seen in its day-to-day dealings to be:

  • of the highest integrity – we consistently act in a professional, respectful, transparent and impartial manner that will withstand scrutiny;
  • results focussed – we demonstrate a thorough understanding of our responsibilities and take pride in our work, owning decisions that we make;
  • responsive – we consult carefully and demonstrate initiative and the ability to adapt to changing circumstances; and
  • clear – we communicate in a straightforward and timely manner.

Organisational structure

Consistent with financial industry best practice, the AOFM operates an overall structure that provides for an appropriate segregation of transaction related duties. Appropriate governance arrangements control and monitor operational aspects of AOFM activities to ensure appropriately high levels of integrity across its business outcomes.

The AOFM Front Office comprises the core operational activities of strategy, markets and funding. This involves portfolio and global market research (including monitoring and anticipating regulatory impacts on financial markets), investor engagement, advisory services, conduct of investment programs (ABSF, SFSF) and issuance. The Front Office liaises with intermediaries and investors and monitors global financial markets in order to effectively achieve smooth execution of AOFM’s financing and portfolio management responsibilities.

The Middle Office comprises enterprise risk, assurance, performance reporting and IT strategy. Associated activities support risk and compliance monitoring and facilitate risk management (including by way of separation of the back and front office functions). The Middle Office also administers controls in various business critical systems. It maintains business databases that support monitoring of, and reporting on, AOFM business activities, and manages broader IT issues through the shared services relationship with the Treasury.

The AOFM Back Office comprises Business Operations and Corporate services. Activities include accounting services, transaction settlements, business administration, executive support and management of corporate communications. Communications Management reports directly to the Chief Executive. Advice on issues regarding the AOFM’s staff development objectives and APS-specific issues are provided directly to the Chief Executive by People Advisory (HR Development).

The Audit Committee reports directly to the CEO and reviews financial and performance reporting, risk oversight and management, and internal controls. Members of the Audit Committee are not officials of AOFM, with the exception of the Chief Risk and Assurance Officer.

AOFM organisational chart, description in supporting text.

Key activities

AOFM objectives are guided by: advancement of macroeconomic growth and stability; and the effective operation of financial markets through issuing debt and investing in financial assets; and managing debt, investments and cash portfolios for the Australian Government1

The annual focus for debt issuance is on meeting government funding requirements while managing the trade-offs between cost and risks associated with the cash and debt portfolios. To be successful in its roles as portfolio manager and issuer, the AOFM plans AGS issuance according to an annual debt management strategy that is endorsed by the Secretary to the Treasury. 

The AOFM endeavours to maintain sufficient issuance and cash management flexibility to be able to respond at relatively short notice to changes in its operating environment. The AOFM is also aware of the need to monitor external factors, such as market conditions, that have the potential to impact its ability to meet the Government’s funding requirements. It does this through various means, including by liaising with a comprehensive and extensive network of domestic and offshore market contacts established through its relationships with AGS intermediaries and investors.

The AOFM is implementing two investment programs on behalf of government; the ABSF and SFSF. Both have had an appreciable impact in terms of AOFM resourcing and business process.

Australian Business Securitisation Fund

The ABSF is a $2 billion investment fund established in April 2019. The policy aims to enhance access to finance for SMEs through targeted investments in the securitisation market. Investments from the ABSF will allow for smaller lenders to compete more effectively against the major banks, and to fill niche gaps in the lending market that are otherwise underserved in Australia.

The securitisation market for residential mortgages in Australia is considered to be well developed. However, at present, the Australian SME securitisation market is constrained by a lack of scale, while low issuance creates a situation whereby potential investors are unwilling to conduct the due diligence needed to enter the market. The AOFM is aiming for the ABSF to invest in SME loan securitisations that will help to establish a track record in lending against the type of collateral new to the securitisation market, and where the ability to obtain credit ratings and attract broad investor interest is severely limited.

Structured Finance Support Fund

As part of the Coronavirus Economic Response Package Omnibus Bill 2020 the Government established the SFSF. It provides for up to $15 billion to ensure continued access to funding markets by SME lenders impacted by the economic effects of the COVID-19 pandemic. In particular, the policy aim is to compensate for where smaller lenders lose access to funding from markets during the period of pandemic disruption. This is achieved through targeted government investments in structured finance markets. 

There are three key elements to the SFSF implementation strategy:

  1. support new issuance of public securitisations sponsored by smaller lenders. This has included the AOFM purchasing existing securities through the secondary market, with the proceeds used by investors to facilitate participation in new primary transactions;
  2. invest in revolving warehouse facilities of small lenders (primarily to fill the gaps in existing facilities arising from investors exiting these arrangements; and/or being unable to meet additional funding calls; and/or being required to elevate the level of credit enhancement within the facilities they finance [ostensibly to meet prudential regulation requirements]); and
  3. establish a ‘forbearance trust’ that will enable the SFSF to invest in trust-issued securities, the proceeds of which will then be advanced to eligible small lenders against capitalised interest on loans that are in COVID-19 related hardship, via their existing warehouse and public securitisation vehicles. 

Table 1 summarises the key activities and strategies AOFM will use in pursuit of its purpose and objectives.

Table 1: Key AOFM activities and strategies

Key activities and strategies 2020-21 2020-22 2020-23 2020-24
Raise funding sufficient to meet the Budget financing task through AGS issuance. 
Deliver the cash management task through managing the Australian Government’s daily cash position. Proactive engagement with key agencies to ensure reliable forecasts for revenue and outlays are always available. Issue Treasury Notes (as short-term financing). Over the medium term, look to enhance cash management practices by leveraging advancements in IT payments infrastructure.
Establish robust business processes to support decisions on SFSF investments.       
Administer investments within the ABSF and SFSF using an appropriate mix of internal and external expertise.
Maintaining and refining an Information Technology (IT) Strategy
Maintain strong and productive relationships with intermediaries and investors. Focus on: AOFM decisions with a potential for impacting its reputation as an issuer, and the market; understanding shifts in investor demand for AGS; and enhancing AOFM’s communication approach to improve its reach and transparency.
Work with Treasury on government debt and associated financial policy related issues. Regularly update Treasury on issues of potential significance for issuance risk and/or debt policy.
Use AOFM market intelligence to inform the issuance strategy, through applying a greater understanding of current demand dynamics and risk.
Pursue business improvement opportunities through better using AOFM system capabilities and increasing operational efficiencies and resilience.

Operating Context

External Environment

AOFM’s portfolio management strategy and issuance activities are shaped by the economic and financial market environments (domestic and offshore). 

A broad range of external factors impact the costs and risks of how the AOFM meets government financing needs. Issuance cost (measured in terms of ‘yield’), investor demand and possible disruptions to the AOFM’s access to financial markets factor into its assessment of how best to meet debt and cash management responsibilities. This includes the timing and choice of issuance method as well as the funding mix. The market outlook when framing an issuance strategy must capture a high degree of uncertainty in relation to any specific event for the year ahead. For this reason, the strategy should be suitable for a range of scenarios.

The global economy has entered the deepest contraction in many decades. With the pandemic crisis still unfolding and the success (or otherwise) in managing the health and economic impacts differing across countries, the global macroeconomic outlook remains difficult to assess. With a backdrop of challenging global financial market conditions, materially increased sovereign funding requirements, noticeably increased corporate calls on capital markets, and investor speculation in equities are expected to weigh on debt capital markets well into 2020-21. However, the actions of the major central banks will to a degree offer compensating support for bond markets, while at the same time heightening a dependence by financial markets generally on the monetary policies and market stability objectives of a few key global institutions. This means that AGS issuance will be undertaken in a ‘crowded market’ (mitigated to some extent by central bank activity) with a potential for ongoing volatility. How investors assess the relative value and risk of holding AGS compared to alternative assets will be important. To a greater extent than past experience, this could constrain the AOFM’s strategic portfolio management choices in the near term – potentially leading to an increased reliance on short-dated issuance and on syndications as an issuance method.

The pandemic is undoubtedly having a significant influence on global output and trade, with the extent of the associated economic impact largely unpredictable. This is because many factors will influence the severity of the unfolding recession and the rate of recovery (for example, the pathway of the pandemic, the progress in finding an effective vaccine, the efficacy and intensity of containment measures, the extent of business disruptions, damage to confidence and changes in behaviour). The International Monetary Fund’s June 2020 baseline scenario assumes that the majority of countries will get on top of the virus spread in 2020, but that some countries will have to maintain stricter restrictions over the second half of 2020. Global growth is expected to contract throughout 2020 with scenarios for a recovery far more wide-ranging than has been the case in past years. The most optimistic of these scenarios have global economic activity rebounding in late 2020 to early 2021 at an above-trend growth rate. This reflects an expected normalisation in economic activity. The more pessimistic scenarios suggest a protracted pandemic impact that will be either the result of, or exacerbated by, trade tensions, geopolitical instability and latent wealth, employment, income and health effects that are yet to be fully realised. These effects would combine with other second-round effects, such as a wave of corporate defaults leading to tighter credit conditions. Moreover, the economic recovery could under some scenarios be indefinitely constrained by structural weakness in aggregate demand, and a widespread dislocation in the pattern of global supply chains that would require adjustments over a long period (i.e. more than several years) for rates of growth to again be supported (even if only at levels experienced in recent years).

Market conditions reflecting extreme volatility across all asset classes characterised the beginning of the crisis in March 2020. After the initial sell-off, markets have been pricing in different outcomes for the recovery. Equity markets are generally on the more optimistic end of the spectrum, whilst fixed income and credit markets have maintained a more pessimistic outlook. In the AGS market, stress was evidenced by increased market maker ‘bid-ask’ spreads consistent with the pressure of unrelenting investor sell orders. Investor risk aversion increased, with lower demand for duration risk and an increased demand for short-dated bonds and Treasury Notes – these changes were readily apparent to the AOFM. A ‘flight to quality’ bid has emerged over recent months and for Australia, this was reinforced by all three major rating agencies affirming their triple-A sovereign rating, notwithstanding two of three ratings agencies revising the outlook from stable to negative. Reasonable expectations suggest this will underpin an ongoing offshore demand for AGS. Furthermore, market conditions to support high volume AGS issuance are expected to remain in place for the near future at least, with AGS yields trading back above US Treasuries (for the first time in over 18 months); trading conditions in Europe and Asia facilitating a high degree of re-engagement in AGS by offshore investors; and the economic outlook generally tending to limit allocations into credit and equities markets.  

As is the case overseas, the Australian Government has introduced fiscal measures to support households and businesses. While having a material impact on outlays, these measures aim to reduce the economic impact (in the short, medium and long-term) arising from the disruption created by the pandemic. 

The acceleration in government spending as support payments ramped up quickly, coupled with declining Budget revenues, have at short notice materially increased the AOFM’s call on financial markets. Given the high degree of uncertainty around economic outcomes and Budget forecasts and the implications for issuance, the AOFM will work to retain flexibility in its operations. Nonetheless, the AOFM is well positioned to cope with material changes to the funding task, having maintained a long-dated issuance bias and built flexibility in its liquidity management operations in recent years. This allows the AOFM to now direct issuance to bond maturities where investor demand is the most prominent, while continuing to support liquidity as required across the yield curve.

The central bank community has responded aggressively to the sudden slowdown in economic activity and tighter financial conditions. Developed economy monetary authorities reduced interest rates quickly (where possible) to their respective lower bounds, and have started, recommenced or continued with material balance sheet expansion. The RBA responded to the crisis by cutting the target for the cash rate to 0.25 per cent, and introducing a target for the three-year AGS bond yield, amongst other measures designed to lower funding costs and support the supply of credit across the economy. Despite elevated government bond issuance, RBA support through bond purchases and forward guidance is likely to continue to exert downward pressure on short-dated interest rates. Muted inflationary pressures have anchored market expectations for inflation at low levels, limiting the prospects of rising long-dated bond yields.

Geopolitical risks present an ongoing source of uncertainty with a high likelihood that they will adversely affect potentially volatile financial markets. Most notably, unresolved tensions between the US and China could quickly re-escalate due to the imposition of new trade restrictions or because of strategic disputes. On balance, rising geopolitical tensions would tend to support demand for safe securities (such as AGS); however, they also have the potential to sponsor dislocation in markets at least in the short term. A potentially big impact on AGS issuance could still be rising US Treasury yields (from a large increase in issuance), reducing the differential with AGS yields. Globally, investors have a base demand for sovereign bonds issued in the major currencies (such as USD, Euro and Yen) and anything that makes these marginally more attractive in value (and risk) has the potential to create a diversion in capital from markets such as AGS toward these much larger core markets.

The onset of the pandemic crisis initially saw significant dislocation within Australian credit markets, including the securitisation market and the market for revolving warehouse finance, both of which are relied upon by non-bank lenders. Early in the crisis, institutional investors cited concerns regarding both the potential economic impact of the pandemic on default rates, and the potential call on liquidity arising from early withdrawals from superannuation funds, for their reluctance to invest. Consistent with its intervention in the residential mortgage-backed securities (RMBS) market during the Global Financial Crisis, the AOFM was directed by the Government in late March to assist small lenders who rely upon the securitisation market. This was to be achieved through the SFSF. By the end of June 2020 the AOFM noted improvements in market conditions, particularly within public securitisation markets such as the RMBS market, however conditions have remained challenging for issuers. The outlook for 2020-21 is somewhat stable going into the year but heightened uncertainty and a deterioration in market conditions could quickly return. Due to ongoing pandemic related impacts, small lenders are vulnerable to further disruption in the business sector through deterioration in the financial resilience of their borrowers. Should there be further withdrawal of investor support from the small lender sector, this will heighten the importance of the SFSF program.


Workforce Capability

The AOFM is a specialised agency focused on sovereign financial and debt management, but has from time to time also been required to design and implement programs that deliver government objectives to support the functioning of different parts of the Australian financial markets (the ABSF and SFSF being current examples). AOFM officials develop credible, high quality external relations, together with a strong appreciation of the importance of maintaining broad market and economic knowledge and information networks relevant to global financial markets. They are also required to be well-versed in related risk identification and management. 

AOFM retains in-house financial market skills and experience to advise other agencies (in particular, Treasury and the Department of Finance) on costs and risks to the government’s balance sheet. The Workforce Plan 2019-2023 aims to support a high performing culture through: (1) recruiting staff with high quality potential; (2) honing available technical skills; (3) enhancing internal industry and policy-related experiences; and (4) fostering deep and broad thinking appropriate to understanding the AOFM’s challenges.

AOFM aims to increase the tenure of high performing staff while creating a reputation as a destination of choice for high potential recruits (especially at the graduate level). While limited in its ability to provide end-to-end career pathways, its focus on meaningful development opportunities for its people has consistently proven to be a sound investment by the agency. 

Information Technology (IT) capability

The AOFM currently relies on a shared services agreement with Treasury for its IT capability. This provides access to a depth of technical support with economies of scale that the AOFM could not replicate in-house. The AOFM IT strategy leverages the Treasury IT platform by ensuring business-specific applications are maintained on that platform. An ongoing challenge has been to scope an independent IT capability to reflect where AOFM business requirements and operational risks differ materially from those of Treasury2.  

IT-related opportunities and risks are evolving quickly for smaller agencies. Cloud-based platforms for deploying Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS) are providing flexible and scalable IT solutions for evolving business requirements. Fully fledged managed services are also being developed. What is relatively new is that these solutions are being raised to IT security levels consistent with a protected network level. Government policy is clearly directed towards these cloud first strategies. The real challenge for small agencies, like AOFM, lies in accessing the IT skills for managing this IT capability and/or finding suitable managed services.  

The AOFM Information Technology Steering Committee (ITSC) is investigating cloud-based platforms to see if they offer a viable alternative for an appropriately specified independent IT capability. Over the next several years, the AOFM will further develop its understanding of what will be required to commence implementing an independent IT capability.  

Risk oversight and management

AOFM risk governance arrangements include enterprise risk management (ERM) and financial risk management frameworks and an independently chaired Audit Committee. These arrangements support the CEO in establishing and maintaining appropriate systems relating to risk management and internal controls, in accordance with the Public Governance, Performance and Accountability Act 2013.

The ERM framework builds on staff expertise in asset and debt portfolio management. The framework is aligned with the Commonwealth Risk Management Policy and industry best practice. It encourages staff to actively engage with risk (informed opportunities and threats) across strategic, portfolio and operational levels. 

The ERM framework is integrated into business planning, with resource prioritisation decisions influenced by a risk appetite posture (as determined by the Executive Group). The Executive Group regularly monitors the organisational risk profile, and actively manages strategic risks. Business units undertake regular horizon scans to identify emerging risks and to leverage new opportunities that improve operational efficiency and effectiveness.

The financial risk management framework focuses on portfolio and cash management risks. It includes policies, related strategies and relevant limits that guide the cost effective management of the debt and asset portfolios, subject to an acceptable level of risk.

The AOFM is committed to maintaining a positive risk-aware organisational culture where risk is viewed as a necessary enabler of business. Risk culture is monitored through periodic internal audit reviews and whole-of-government surveys (such as Comcover Benchmarking and the State of the Service). 

Key risk profile

The key areas of risk to achievement of the AOFM’s purpose and objectives arise from uncertainty of external factors, or the implementation of major business initiatives. Table 2 outlines key risks (both upside and downside) and planned management actions.

Table 2: Key risk profile

Management Actions
Opportunity to position the AOFM as a trusted advisor in market intelligence to facilitate government policy or programme decisions.
  • Establishing and maintaining relationships with relevant government agencies to anticipate future program responsibilities and their need for market intelligence advisory services. 
  • Broadening staff skill sets through workforce planning and exposure to the internally developed reporting tool – the Business and Market Intelligence (BMI) Portal. 
  • Further developing a governance framework for debt management and advisory activities with Treasury.
Strategic risks
Failure to anticipate, recognise or respond to emerging market trends or disruptive technologies.
  • Maintaining a robust financial risk management framework to build and guide operational resilience.
  • Conducting regular environmental scans and simulations to support portfolio management. 
  • Maintaining an ongoing dialogue with market participants and Treasury regarding market conditions, demand for AGS and industry reforms. 
The market loses confidence in AOFM as an issuer, creating a negative view of the AGS market.
  • Maintaining an Investor Relations Strategy to meet investor engagement needs.
  • Maintaining consistency in announcements and actions to support integrity and transparency in communications with the market.
  • Utilising the BMI Portal to allow staff to examine markets dynamically through the lens of a buy-side participant, enabling adjustment to strategies to best match prevailing market conditions.
Failure to meet AOFM’s business requirements through the memorandum of understanding (MOU) purchaser-provider relationship.
  • Maintaining regular dialogue with Treasury, at the Executive level, to raise awareness of the importance of service provision to our operational outcomes. 
  • Maintaining and refining an IT Strategy in line with AOFM business needs and its risk preferences.
Portfolio risks
Failure to settle tenders or to make interest or maturity payments.
  • Developing and maintaining strong stakeholder relationships and sound business procedures, systems controls and contractual arrangements. 
  • Maintaining mature business continuity (BC) plans and procedures and conducting regular testing. 
  • Ensuring third party BC and disaster recovery arrangements are in place.
  • Inaccurate forecasts for the daily Official Public Account (OPA) cash balance.
  • Maintaining strong relationships with key spending and revenue collection agencies. 
  • Daily cross-checking of cash flow forecasts with the Reserve Bank of Australia (RBA). 
  • Maintaining financial risk policies which specify treatments to meet unforeseen cash shortfalls.  
AOFM is unable to meet government financing requirements.
  • Maintaining a precautionary asset balance (liquidity buffer) adjusted as required to account for changes to risk assessments.
  • Maintaining close engagement with Treasury and the RBA to inform our assessment of funding conditions.
  • Researching alternative funding markets to supplement existing AGS issuance.
  • Maintaining access to an overdraft facility with the RBA.
Operational risks
The AOFM’s IT infrastructure fails to meet business requirements or service levels, impacting the AOFM’s ability to effectively perform its core activities.
  • Holding regular contract management meetings to ensure adequate monitoring of IT services and forewarning of change control impacts.
  • Maintaining multiple levels of redundancy through remote access to industry systems and supplier stand-in arrangements.
  • Deploying secure laptops to support staff mobility. 
IT resources and/or other resources are not available or do not function as intended, causing disruption to time-critical business functions.
  • Regularly testing BC arrangements, including live scenarios and third party testing. 
  • Implementing IT security measures to manage potential cyber threats. 
  • Maintaining staff awareness regarding emerging vulnerabilities and defences to enhance preparedness. 
The AOFM discloses market, commercially and/or politically sensitive information to external parties which could impact market prices, the government’s reputation or commercial business arrangements.
  • Providing regular staff training on the principles set out in the Protective Security Policy Framework for handling of confidential information. 
  • Requiring staff to annually attest to their adherence to the Australian Public Service Code of Conduct and the Australian Financial Markets Association Code of Conduct. 
  • Maintaining a recorded telephone lines policy to protect the interests of the AOFM.
AOFM is assessed as materially underperforming in its implementation of the ABSF and SFSF.
  • Ensuring adequate Budget funding for implementation of the ABSF and SFSF. 
  • Undertaking regular and extensive industry consultations on the design and operation of the ABSF and SFSF. 
  • Ensuring that the implementation approach leverages in-house experience in managing securitisation portfolios.
  • Engaging specialist resources to assist with implementation of the Funds.


The Treasurer is responsible for determining the Commonwealth debt management mandate and has the power to authorise the investment of public funds. The Treasury is responsible for borrowing money on the public credit of the Australian Government and for administering legislation associated with AOFM responsibilities. The Secretary to the Treasury is accountable for implementation of the debt management mandate, and draws on the resources of AOFM and the Treasury in advising the Treasurer on strategic debt policy and wider public policy implications.

The CEO is accountable to the Treasurer and the Secretary to the Treasury for Commonwealth debt and cash portfolio management and policy implementation assigned to AOFM to support the Australian financial system. 

The AOFM is committed to good governance principles and sound management practices in pursuing the achievement of its purpose and objectives. The Executive Group supports the CEO in managing the performance of the agency. 

The Audit Committee provides independent assurance to the CEO on the effectiveness of AOFM financial and performance reporting and risk management arrangements. Assurance activities support the Audit Committee in monitoring the effectiveness of the internal control environment.


The AOFM relies on a range of relationships for gathering and disseminating information and for cooperation in achieving its objectives. These entities range from other government agencies to financial market industry bodies, banks and investors. 

To better understand the global financial market environment the AOFM maintains an active dialogue with market participants, including domestic and offshore investors, intermediaries, the RBA and other sovereign debt issuers. The AOFM maintains close ties to the Treasury in order to understand the potential for changes to the financing task.

In managing the cash portfolio, the AOFM needs to receive timely forecasts on government outlays and tax receipts. Accordingly, it maintains close and frequent communication with spending agencies, the Department of Finance, the RBA and the Australian Taxation Office.

The AOFM maintains strong, productive relationships with intermediaries, investors and the Australian Securitisation Forum to support its judgements regarding the ABSF and SFSF investment programs. 


The AOFM recognises it has limited short to medium-term influence over key drivers of the cost of the debt portfolio, such as the amount of debt outstanding and the level of market yields. However, it can influence the cost of the debt portfolio over time through the choice of instruments and maturities it issues, for which cost is not the only consideration (for example, market risks are another variable to consider). There are also intangible (cost and risk) benefits realised over time from market confidence in the AOFM. This is because investors form views of, and are influenced by, issuer reputation delivered in large part through consistency and transparency in its interaction with the market via its issuance and communications.

Judgments that balance considerations between cost and risk are required but an overriding aim is to ensure government financing requirements are met in full and on time. Underpinning this are considerations about maximising the likelihood of access to financial markets through a wide range of circumstances, and maintaining business processes that reflect minimal appetite for failure in any critical function (such as successful execution and settlement of bond tenders, and syndications). 

The AOFM has chosen to use indicators to cover the following key considerations: one is the cost effectiveness of its choices with respect to portfolio management and issuance; another reflects its capacity to maintain market access to finance when required; and a third can be used to indicate how the AOFM influences its reputation in financial markets. A further four indicators of performance for implementation of the ABSF and SFSF programs have been introduced this year. These encompass the broader benefits of each program and in particular assessments of the extent to which: (1) AOFM has achieved the ABSF Investment Mandate aim over the medium-term; (2) the SME securitised lending market has developed, as per the ABSF investment mandate; (3) risk assessed and timely assistance has been available to smaller lenders through warehouse funding; and (4) the SFSF has been able to crowd-in private sector capital in support of continued functioning of the securitisation market.

Reporting against these in the Annual Performance Statement will take into account if failure to meet targets is a reflection of broader market changes, or decisions taken by the AOFM during the year. It is difficult for the AOFM to plan four years in advance because the financing task is only revealed at the Budget each year, and global financial market conditions are inherently uncertain and at the very least remain subject to volatility. However, the operating context takes into account a range of scenarios that could impact the issuance task beyond the current year. 

The performance measures in Table 3 will remain applicable for the entire reporting period, subject to annual review. 

Table 3: Key performance indicators

Key Performance Indicator



Meet the budget financing task in a cost-effective manner subject to acceptable risk.

Term issuance

Shortfall in volume ($) between actual Treasury Bond issuance and planned issuance announced at the Budget and subsequent releases.


Financing cost (portfolio)

The cost of the long-term debt portfolio compared to the 10-year average of the 10-year bond rate.


Financing cost (issuance)

The cost of Treasury Bond issuance over the past 12 months compared to the average 10-year bond rate over the same period.


Tender issuance yields

Weighted average issue yield at Treasury Bond and Treasury Indexed Bond tenders compared to prevailing mid-market secondary yields.

Issuance yields at or below the market rate

Facilitate the Government’s cash outlay requirements as and when they fall due.

Use of the overdraft facility

Number of instances the RBA overdraft facility was utilised to the extent that it required Ministerial approval during the assessment period.


A credible custodian of the AGS market and other portfolio responsibilities.

A liquid and efficient secondary market

Annual turnover in the secondary market for Treasury Bonds and Treasury Indexed Bonds.

Greater than previous year

Market commitments

Number of times the AOFM failed to take actions consistent with public announcements.


Efficiently and effectively implement the ABSF and SFSF programs.

ABSF rate of return Accrual earnings (net of losses) divided by average drawn (invested) amount. Greater than or equal to the investment mandate benchmark (Bloomberg AusBond Treasury 0-1 year index).
SME loan level data template in use for securitisation sector investment analysis SME loan level data template (i) was: agreed to by the industry body; and (ii) populated by sponsor of ABSF investment. (i) Agreement by 31 March 2021; (ii) data collection commenced by 30 June 2021.
SFSF warehouse proposals processed Number of warehouse proposals recommended to the delegate Up to 20 per quarter while there are, at any time, outstanding proposals with AOFM for consideration.
SFSF leverage ratio Private sector investment in primary transactions of small lenders, in which AOFM was engaged, divided by SFSF monies applied to public (primary + secondary) investments. > 4 for the year overall

Key strategic challenges for the coming year

For the year ahead, the AOFM will remain tightly focussed on the achievement of its core business activities. This approach will recognise that implementation of both the ABSF and SFSF programs are resource-intensive tasks, technically complex, and are taking the AOFM into areas of financial markets very different to those relating to management of government debt financing and liquidity needs. The business processes developed to support these programs impacted most parts of the agency throughout 2019-20, and will continue to do so for the entirety of 2020-21. Given this context, the AOFM is taking the prudent approach of not initiating any further new projects. This will allow the agency to target its resources and capability towards ensuring smooth execution of the large issuance programs ahead and managing the potential for ongoing impacts arising from the pandemic situation, as well as administering the new funds. 


1For more information, see Outcome 1 for the AOFM as published in the Treasury Portfolio Budget Statements 2019-20.

2Subtle differences in IT requirements arise from the focus on policy delivery for Treasury compared with the operational and transaction execution focus of AOFM in financial markets.