Finance Minister Joe Oliver says he will give his colleagues more details about the issue of the $1.5 billion bond issued by the Federal Government on Thursday, which prompted the central bank to intervene in the markets to help clear the way for a $2 billion loan to the state.
Mr Oliver says the central banks decision on Thursday to issue a $1 billion bond was “well-reasoned” and “fair” and that the Federal government would have received more support had it been issued by another lender.
The central bank says the $700 million bond issue was designed to assist the State Government in meeting the $20 billion of capital and operating costs that it had identified as necessary to address the “significant” shortfall in the state’s capital budget.
It said the issuance was to help finance a new $10 million-a-year cash grant to the State.
“The issuance was well-reasoning and the issuance is in line with the objectives of the funding strategy outlined in the Government’s budget and is supported by the State’s capital plan,” Mr Oliver said.
He said the bond was issued to cover the costs of the “shortfall in the State pension and the additional capital needs associated with the Government of NSW” and would be repaid in full when the $3 billion of debt to the Commonwealth is repaid.
In a statement, Mr Oliver says that the Government has also provided a further $2 million in cash to help pay for the bond issue.
A further $600 million was also provided to support the State government in its capital and operational needs.
Despite a strong market reaction to the issuance, the bond has been broadly praised as a major boost to the economy and has been widely welcomed by investors.
On Thursday, the central Bank issued a bond of $700m to help cover the State and Commonwealth Government’s capital and capital plan.
More to come.