Australian Government Balance Sheet Management

Wilson Au-Yeung, Jason McDonald and Amanda Sayegh

in Fiscal Policy and Management in East Asia

Published by University of Chicago Press

Published in print November 2007 | ISBN: 9780226386812
Published online February 2013 | e-ISBN: 9780226387062 | DOI:
Australian Government Balance Sheet Management

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The Australian government has taken steps over the past decade to improve the sustainability of government finances, and, in particular, has significantly reduced its debt liabilities, avoiding many of the risks associated with high debt levels. In April 2006, Australia's general government net debt was eliminated. Having reduced net debt, the government's attention has turned to the financing of broader balance sheet liabilities, such as superannuation obligations to its employees. The government has announced that it will establish a “Future Fund” to finance the public sector's superannuation liabilities. The creation of the Future Fund raises the significant policy question of how best to structure the government's balance sheet to reduce overall financial risk. This chapter sets out a framework for Australia's optimal government balance sheet management and presents some preliminary estimates of the types of financial assets and liabilities that would reduce overall financial risk. The results support the Future Fund investing in a broad range of financial assets that includes nominal domestic debt and equities from selected countries.

Keywords: Australia; balance sheet; assets and liabilities; Future Fund; balance sheet management; financial risk; domestic debt; equities; government finances; superannuation

Chapter.  11183 words.  Illustrated.

Subjects: Business and Management

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