Australian Office of Financial Management
Section 1: Overview
Australian Office of Financial Management is responsible for the management of the Australian Government’s debt and financial assets entrusted to it.
The AOFM aims to manage its net debt portfolio at least cost over the medium term, subject to an acceptable level of risk. It also contributes to the operation of financial markets by supporting efficient Treasury Bond and Treasury Bond futures markets. These markets allow participants to better manage their interest rate risks and to contribute to a lower cost of capital in Australia.
The AOFM issues long-term fixed interest debt to maintain the efficiency of the Treasury Bond and Treasury Bond futures markets. It issues bonds with tenors chosen to support the 3-year and 10-year Treasury Bond futures baskets. The current strategy is to issue approximately $5 billion in each bond line.
The AOFM manages the cost and risk inherent in the debt on issue, by executing domestic interest rate swaps to achieve lower public debt servicing costs, while at the same time keeping the expected variability of cost to an acceptable level. It is guided in this task by reference to a benchmark portfolio.
Approximately 15 per cent of the long-term debt portfolio is currently indexed debt. The interest rate risk inherent in this debt is taken into account in setting the portfolio benchmark.
The AOFM also manages the overall level of cash in the Official Public Account with the Reserve Bank of Australia (RBA). It does this through making short-term deposits with the RBA to offset fluctuations in the daily flows in and out of the government’s accounts.
The AOFM currently acts as an agent for the Department of Communications, Information Technology and the Arts (DCITA) in making investments for the Communications Fund. These investments and their earnings are reported by DCITA and not the AOFM.
1.1 Summary of agency contributions to outcomes
The products and services delivered by the agency (outputs and administered policies, products and services) which contribute to the achievement of the outcome for the Australian Office of Financial Management are summarised in Table 1.1 below and Figure 2 on page 117.
Table 1.1: Contribution to outcomes
