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Debt Management in a Low Debt Environment: The Australian Government's Debt Management Framework

Author

Listed:
  • Blair Comley

    (Treasury, Government of Australia)

  • David Turvey

    (Treasury, Government of Australia)

Abstract

The Australian Government's very low level of government debt sets the context for Australia's debt management policy. Australia's debt management policy seeks to achieve two objectives: supporting financial market efficiency; and achieving an appropriate balance of cost and risk for the Government. To achieve these two objectives the Government uses two instruments: physical bond issuance and financial derivatives (primarily interest rate swaps). Use of these two instruments allows the two targets to be independently managed. Financial market efficiency requires the issuance of sufficient Treasury bonds to support the Treasury bond futures market. Given this profile of physical issuance, the Government enters into interest rate swaps to achieve an appropriate balance between costs and risks. Given the low level of debt in Australia, particular attention is given to catering for short term cash management trends and the specific issues raised by indexed debt.

Suggested Citation

  • Blair Comley & David Turvey, 2005. "Debt Management in a Low Debt Environment: The Australian Government's Debt Management Framework," Treasury Working Papers 2005-02, The Treasury, Australian Government, revised Feb 2005.
    • Handle: RePEc:tsy:wpaper:wpaper_tsy_wp_2005_2
    as

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    File URL: http://archive.treasury.gov.au/documents/957/PDF/Treasury%20working%20paper%202005-02.pdf
    File Function: First version, 2005
    Download Restriction: no
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    References listed on IDEAS

    as
    1. Ross, Stephen A, 1977. "The Capital Asset Pricing Model (CAPM), Short-Sale Restrictions and Related Issues," Journal of Finance, American Finance Association, vol. 32(1), pages 177-183, March.
    2. Bank for International Settlements, 2001. "The changing shape of fixed income markets: a collection of studies by central bank economists," BIS Papers, Bank for International Settlements, number 05.
    3. Black, Fischer, 1972. "Capital Market Equilibrium with Restricted Borrowing," The Journal of Business, University of Chicago Press, vol. 45(3), pages 444-455, July.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Ross P. Buckley & Peter Dirou, 2006. "How to Strengthen the International Financial System by Restructuring Sovereign Balance Sheets," Annals of Economics and Finance, Society for AEF, vol. 7(2), pages 257-269, November.

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    More about this item

    Keywords

    Debt management; government bonds; financial market efficiency; Australian Office of Financial Management; AOFM; portfolio management;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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