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Legislative Assembly for the ACT: 1999 Week 2 Hansard (11 March) . . Page.. 652 ..
Ms Carnell: The answer to the member's question is as follows:
(1) One of the main functions of the Central Financing Unit (CFU) is to invest the surplus cash from the operating activities of the government on a daily basis as a means of gaining investment returns for the ACT. This active cash management arrangement results in either new investment purchases or withdrawals of invested funds on a daily basis. The result is a high gross turnover of investment purchases through the statement of cashflows. This is off-set by gross sale/maturity of investments (ie. investment withdrawals).
As well as investing the surplus daily cash of the government (taxes, fees, fines, commonwealth funding, surplus agency funds etc) the CFU has also undertaken arbitrage trading transactions for a number of years now. This is a process whereby the ACT issues commercial paper from its commercial paper program for maturities averaging approximately 80 days and then reinvests the proceeds in highly rated commercial paper, promissory notes or bank bills to the same maturity. The CFU has well defined exposure limits including monetary limits and rating limits (minimum A2 Standard & Poors) within which all investments, including arbitrage related are restricted. Again, the result of these transactions is such that there is a high gross turnover of investment purchases through the statement of cashflows which is off-set by gross sale/maturity of investments (ie. investment withdrawals). The arbitrage program is wound down by the end of the financial year such that there is a nil effect on the balance sheet for the components relating to arbitrage. The investment purchase transactions in respect of externally placed investments for Superannuation Provision Fund's are also included in the consolidated territory statement of cashflows. Superannuation Fund investments are managed within the CFU general government funds until such time that a large enough pool has accrued so that the funds can be placed with one of the specialised external managers.
The following table details the investment purchase transactions as per the January financial statements (Statement of Cashflows). Investments (excluding arbitrage related) are separated into two groups; General Government Investments (managed externally by National Mutual Funds Management) and the Superannuation Provision Fund Investments (managed by five various fund managers). Investment Type Source of Funds YTD Projected 31/1/99 Outcome $'000 $'000
General Government Surplus taxes, grants & agency funds 516,782 1,199,984
Arbitrage Borrowings through commercial paper program 273,369 800,000
Superannuation (a) Budgeted funds for Superannuation 0 50,000 790,151 2,049,984 (a) The budget estimate provides for the placement of $50m of superannuation funds with external
managers. This placement is subject to a review by consultants of the strategic asset allocation which is
currently underway.
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