Queensland steers councils toward bank funding

Queensland Treasury Corporation may not be able to guarantee debt funding to local councils after the middle of the year, leaving councils free (and obliged) to seek funding from banks, the Financial Review reported.

The newspaper reported that QTC, which has an effective monopoly on meeting the debt funding requirements of the local government sector in Queensland, said it could only guarantee access to funds until June this year.

For a couple of nominated infrastructure projects in Brisbane funding will be available for next financial year as well.

State government has for months become uneasy over its ability to fund at viable rates, or even at all, through the debt market. All states, as with the Australian government, are budgeting for significant deficits this year.

Talks between state treasuries and the federal treasury over Commonwealth assistance to state financing plans, such as a guarantee over state debts, have not progressed. The state government funding agencies worry that the guarantee on bank deposits has made bank liabilities a more attractive investment option than state debt and thus reduced demand for, and driven up the cost of, their debt.

The Financial Review separately reported that Tasmanian Public Finance Corp failed to attracted sufficient bids on a $100 million tender of six-year debt on Friday, forcing managers to call around investors to finally place the loan. As a result the spread over Commonwealth government bonds widened by 20 basis points, the newspaper reported.