States get Fed boost too
(28 July 2009 – Australia) In a further bid to boost the revival of Australia’s economy, the Federal Government has expanded the concept of a funding guarantee, so that not only banks can take advantage of its credit rating, but Australian states and territories can too.
The Federal Government announced the commencement of the Guarantee of State and Territory Borrowing, as a crucial step in continuing with infrastructure investment.
Federal Treasurer, Wayne Swan, announced that the guarantee is critical to ensuring that State and Territory Governments maintain their ‘nation building’ infrastructure investment.
Swan said that pulling back on critical investment now would hinder a recovery from the global recession, resulting in slower growth and higher unemployment into the future.
On 25 March 2009, the Rudd Government announced that it would be providing a time-limited, voluntary guarantee over state and territory government borrowing, which has now commenced.
The global recession has severely constricted liquidity in state government bond markets, Swan indicated.
State and Territory governments will be able to apply to the Reserve Bank of Australia, as the administrator of the Guarantee, for a guarantee over their eligible borrowings.
The Guarantee will cover securities of a length up to 15 years including indexed securities and those that have cross default clauses. This will cover the majority of the States and Territories' actively traded stock and will support liquidity in the secondary bond market.
Securities in foreign currencies, or those that are deemed to be complex, will not be able to be guaranteed.
The Government indicated that the Guarantee will continue to be offered until market conditions normalise. Securities covered by the Guarantee will continue to be guaranteed until either they mature or are bought back and extinguished by the issuer.
Federal Treasurer, Wayne Swan, announced that the guarantee is critical to ensuring that State and Territory Governments maintain their ‘nation building’ infrastructure investment.
Swan said that pulling back on critical investment now would hinder a recovery from the global recession, resulting in slower growth and higher unemployment into the future.
On 25 March 2009, the Rudd Government announced that it would be providing a time-limited, voluntary guarantee over state and territory government borrowing, which has now commenced.
The global recession has severely constricted liquidity in state government bond markets, Swan indicated.
State and Territory governments will be able to apply to the Reserve Bank of Australia, as the administrator of the Guarantee, for a guarantee over their eligible borrowings.
The Guarantee will cover securities of a length up to 15 years including indexed securities and those that have cross default clauses. This will cover the majority of the States and Territories' actively traded stock and will support liquidity in the secondary bond market.
Securities in foreign currencies, or those that are deemed to be complex, will not be able to be guaranteed.
The Government indicated that the Guarantee will continue to be offered until market conditions normalise. Securities covered by the Guarantee will continue to be guaranteed until either they mature or are bought back and extinguished by the issuer.
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