Australian Government, 2009‑10 Budget

Statement 7: Asset and Liability Management

Managing changes in the Government's borrowing needs

The Government's increased borrowing requirement in 2009‑10 and over the forward estimates will be largely met by issuance of Treasury Bonds and Treasury Notes. The AOFM will continue to explore the use of other financing instruments, such as Treasury Indexed Bonds, in consultation with market participants.

Treasury Bonds

The increase in Treasury Bond issuance in the second half of 2008‑09 has been absorbed relatively smoothly by the market. The face value of Treasury Bonds on issue at end‑June 2009 is projected to be around $79 billion, an increase of approximately $30 billion on end‑June 2008.

Treasury Bond issuance in 2009‑10 is expected to be around $60 billion. The stock of Treasury Bonds on issue at end‑June 2010 is projected to be around $133 billion.

The bulk of the issuance in 2009‑10 will be into existing bond lines and will take account of the relative demand for lines of different maturities. This will enhance the liquidity and efficiency of the Treasury Bond market. At least one new Treasury Bond line is planned to be issued in 2009‑10. This is expected to be a Treasury Bond maturing in 2022. Issuance of this bond line will support the operation of the 10-year Treasury Bond futures contract.

Treasury Notes

Since the February 2009 Updated Economic and Fiscal Outlook, the Government has recommenced issuance of Treasury Notes. These are short‑term debt securities used primarily to meet within‑year financing requirements resulting from differences in the timing of budget receipts and expenditures.

At end‑June 2009, the volume of Treasury Notes on issue is expected to be around $17 billion. Issuance of Treasury Notes in 2009‑10 will depend on the size and profile of the within‑year funding flows. The volume of Treasury Notes will therefore vary over the course of the year. At least $10 billion of Treasury Notes will be kept on issue at all times to maintain a liquid market in the notes.

Aussie Infrastructure Bonds

The Government's investment in the National Broadband Network company will, in part, be funded through the issuance of Aussie Infrastructure Bonds (AIBs). AIBs will provide an opportunity for households and institutions to invest in the National Broadband Network.

The structure and form of AIBs will be finalised in conjunction with the implementation study for the National Broadband Network.

Legislative framework

The Commonwealth Inscribed Stock Act 1911 places a cap on the outstanding stock of CGS. The Government will legislate to increase the cap as it becomes necessary.

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