Hockey throws banks some bones
Commonwealth government bonds will be in more abundant supply as the new Australian government faces up to the fiscal choices ahead of it.The Australian Office of Financial Management said yesterday that treasury bond issuance in 2013/14 is now expected to be around A$70 billion.This is $20 billion more than projected by the AOFM at the time of the May budget.One reason for this is a further shortfall in tax receipts, which the treasurer, Joe Hockey, implied on Tuesday had "deteriorated further."A second reason is the decision to cater to a request from the Reserve Bank of Australia to bolster the reserve fund by $8.8 billion. This will be funded by government borrowing, Hockey said yesterday.Hockey said the Reserve Bank Reserve Fund currently sits at 3.8 per cent of the RBA's assets at risk. He said that "since the election, the governor of the Reserve Bank has written to me indicating that the Reserve Bank board believes that it would be appropriate for the Reserve Bank Reserve Fund to be increased to 15 per cent of the bank's assets at risk.Documents released by the RBA in April, under Freedom of Information laws, aired some of the tension between the RBA and the then Labor treasurer over the ability of the RBA to pay dividends.The law governing the RBA leaves dividend policy to the treasurer, after consultation with the RBA board. Last year, the treasurer determined that the RBA should pay a dividend of $500 million.Yesterday, Hockey denied the federal government was bailing out the Reserve Bank.Hockey said the grant did not mean it was in trouble, but it was important that Australia's key institutions were in the best shape to face the financial challenges ahead."It's not a bailout," he said, adding he did not want to suggest the central bank was in "any way in a diminished position."