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Costello should come clean on $3 billion bungle.



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Media Release

BOB McMULLAN MP SHADOW TREASURER FEDERAL MEMBER FOR FRASER

TELEPHONE: (02) 6277 4803 ! FACSIMILE: (02) 6277 8496

24 February 2002

COSTELLO SHOULD COME CLEAN ON $3 BILLION BUNGLE

I call on Treasurer Peter Costello to release publicly all documents relating to the $3 billion losses in the government’s foreign currency dealings over the past two years.

Mr Costello should release all reports, advice, and recommendations from his department and from the Australian Office of Financial Management and other agencies, including particularly the AOFM advisory board’s recent review of the scheme.

He should release any recommendations he may have received on the management of the scheme, along with his response to the AOFM review and its recommendations.

The scheme uses financial arrangements called currency swaps to help manage Australia’s foreign borrowings. Treasury has admitted that in 1999-2000 and 2000-01 the unrealised losses amount to $3 billion. In addition, AOFM told Senate Estimates hearings last week there had been $200 million in realised losses this financial year, and the Auditor-General has reportedly said further losses of $1.2 billion are likely unless the AUD recovers significantly.

I believe these papers will show Mr Costello has been slow to respond to the accumulating losses in the scheme, at a potential cost to taxpayers of billions of dollars. If he had acted quickly when the dollar fell the losses could have been substantially reduced.

In the light of the lies and evasions the government has perpetrated over the children overboard affair, no one will take seriously any claim that he was not made aware of these problems. He should have acted sooner.

Until the scheme is fully wound up and all contracts closed down, the government faces huge potential losses.

Mr Costello should come clean on his billion dollar bungle.

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He should also answer the following questions:

• When was he first advised that AOFM was incurring losses, whether realised or not, under this scheme?

• How many times did he receive advice to that effect and what was his response on each occasion?

• When was he advised of the Auditor-General's concerns and what action did he take as a consequence?

• When was he first approached to allow the guidelines limiting exposure to foreign currencies to 15 per cent of the debt portfolio to be breached?

• What is the average maturity of the remaining swaps used in this scheme, and at current exchange rates what will the losses be when they are closed out?

Further information: Robert Garran (02) 6277 4803, 0419 692 504