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Government bid to further reduce Commonwealth debt



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TREASURER

no. αα.

EMBARGO - 6.30pm AEST

STATEMENT BY THE TREASURER, THE HON. P.J. KEATING, MP

GOVERNMENT BID TO FURTHER REDUCE COMMONWEALTH DEBT

The Government will continue its unprecedented debt repayment program in January when it seeks to further purchase debt issued in the domestic Sterling market.

The Commonwealth has announced this morning (London time), through its tender agent,S.G. Warburg Securities, that it intends to conduct an on-market tender operation in January 1990.

As a result the Commonwealth expects to redeem some or all of its outstanding Sterling liabilities which currently amount to 233 million pounds.

The planned January tender follows a successful market repurchase program in the Sterling market undertaken since July 1, 1989.

An on-market tender in the Sterling market is a continuation of the debt retirement program which began in 1987-88 and represents another step in the Government's overall strategy of using Budget surpluses to repay both foreign currency and domestic debt.

In 1987-88 foreign currency debt of $1.6 billion was repaid, a further $3.2 billion was repaid in 1988-89 and it is planned a further $2 1/2 billion will be repaid by 30 June, 1990.

This is the largest Government debt repayment program in Australia's history and as a result Commonwealth Government debt issued overseas has been reduced from about $15 billion two years ago to $8 billion at 30 September 1989.

COMMONWEALTH PARLIAMENTARY LIBRARY MICAH

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The extensive repayment of debt by the Commonwealth means that the Commonwealth Government is now a net creditor on its overseas accounts. That is, the Commonwealth's official reserve assets with the Reserve Bank are worth $21 billion, while its liablities are $8 billion of foreign currency debt.

As -a percentage of GDP the Commonwealth's external debt has fallen from 6 per cent to under 3 per cent as at 30 June 1989. It is forecast to fall to 2 per cent by the end of 1989-90. Over the period of the Government net foreign currency debt repayment will have totalled $4 billion. In contrast, in seven years between 1975 and 1983 the former Government borrowed a net $4 1/2 billion.

CANBERRA December 20, 1989