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Legislative Assembly for the ACT: 1999 Week 2 Hansard (11 March) . . Page.. 653 ..

(2) Another of the main functions of the Central Financing Unit (CFU) is to undertake all new borrowings on behalf of the government through the financial markets. Historically new borrowings have been undertaken for the general government by way of inscribed stock issues, a samurai bond issue, a retail bond issue and through the ACT's commercial paper program. Any borrowings which are funded through the commercial paper program are generally for terms of approximately 90 days and require refinancing on a regular basis. The effect of this is a relatively high gross turnover of borrowings received. This is off-set by gross repayment of borrowings. The net increase or decrease will be dependant on whether there is a need to raise new borrowings in the year or if existing borrowings will be repaid.

In respect of the commercial paper program, the ACT has a dealer panel comprising Commonwealth Bank, National Bank, Bankers Trust and JB Were Capital Markets who arrange funding for the ACT when it wishes to issue commercial paper. In these instances a tender process is utilised to gain the lowest cost of funds from these dealer panel members. Other new borrowings (inscribed stock issue, samurai bond etc) have been undertaken by way of seeking expressions of interest for an arranger/manager and selecting the financial institution which best meets the appropriate evaluation criteria including the ability to provide funding, cost of funds and product for example. These borrowings have generally been sourced by the selected manager from the Australian wholesale financial market, the Australian retail market and the Japanese retail market. Arranger/Managers have included Commonwealth Bank, Bankers Trust and Chase AMP Bank Limited.

As outlined in question 1, arbitrage related transactions comprise of two transactions:- the raising of new borrowings through the commercial paper program, and then reinvesting the proceeds of these borrowings. The transactions relating to the borrowing element of arbitrage trades results in a high gross turnover of borrowings received, off-set by repayment of borrowings. 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.

Non GGS or PTE entities are able to invest surplus funds with the CFU. These include the ACT Workers Compensation Supplementary Fund, Rental Bonds Fund, Canberra Hospital Trust and most trust accounts are also classified as external entities. For the purposes of the consolidated territory financial statements, these transactions are classified as a receipt of borrowings. When the investment is returned to these entities, the repayment transaction is classified under repayment of borrowings. A high activity of investment deposits and withdrawals will result in high gross turnover figures. These transactions are off-set in the investment purchase transactions. The CFU reinvests dollar for dollar all agency investment deposits.

1998-1999 Budget Paper Number 3 pages 207 to 212 provides a full summary of ACT

Government borrowings and debt.

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