Mike Baird | Member for Manly - Roozendaal Must Act - Commonwealth Guarantee Blows Out Cost of Borrowing for NSW

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Roozendaal Must Act - Commonwealth Guarantee Blows Out Cost of Borrowing for NSW

Thursday, 11 December 2008

The NSW Government will have to spend at least $150 million more to borrow money over the forward estimates period due to the Commonwealth bank guarantee, said Shadow Finance Minister Mike Baird who is calling for immediate action to protect NSW taxpayers.

“The first Commonwealth guaranteed bank bonds were issued in the markets this week and as a result spreads on 10-year NSW T Corp bonds jumped close to 30 basis points*,” Mr Baird said.

“The problem is highlighted by the fact the Banana Coast Credit Union would have a cheaper cost of funds than the NSW Government,” he said.

“The NSW Government needs to issue up to $10 billion of new bonds over the next 12 months to pay for its infrastructure projects. However, going by spreads this week, it will now cost the State around $25 million more because of the guarantee given to private banks by the Federal Government.

“The NSW Liberal/Nationals are calling on Eric Roozendaal to urgently meet with Wayne Swan to bring down the cost of borrowing for NSW.

“The Treasurer should either seek a Commonwealth guarantee for NSW Government bonds or have the Commonwealth raise funds to provide to the State.

“Kevin Rudd and Wayne Swan must implement a broader plan to increase liquidity, as NSW will not be able to access the funds it needs for infrastructure.

“There is the option for tax breaks to be given to people who buy retail infrastructure bonds so any spare cash is invested into infrastructure to drive the economy.”

Mr Baird said the seriousness of the problem was highlighted in a Bloomberg report this morning in which the head of fixed-income research at Westpac said, ‘there is going to be a level where the States say, we’re not prepared to raise money at that price’.

“The market is anticipating States may have to scale back their infrastructure projects because the cost of borrowing will be too high.

“Eric Roozendaal cannot sit back and watch the cost of borrowing explode for NSW and further jeopardise the critical infrastructure needs of the State,” Mr Baird said.

MEDIA: Lisa Harrington - 0406 726 880

* Spreads on 10 year NSW TCorp bonds increased from 80 basis points on 9 December 2008 to 108 basis points on 11 December 2008 as the first Commonwealth guaranteed bank bonds were issued during this 48-hr period.

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Comments (2)

Roozendaal must act!!!

Mike, I think you have Eric on the sidelines when it comes to Economic Forecasting and knowledge of the movemnts within the financial markets. Keep pushing Mike the media will get the message that you know this area inside out, in due course.

Posted by: Col. Jarvis at 12-12-2008 13:56

Reserve Bank System

Our Government has the right - and the imperative - to print the money and borrow it to itself. Any borrowing from a third party simply constitutes unfair business gains to private interest by the government. The reserve bank is private, it is not a government agency, it is privately owned, and it has no reserves. It doesn't have gold, silver, bananas, anything to back up the currency paper and electronic credits that it "prints", yet, it profits from this action - a sovereign act given to it by our politicians in power. WHY? The answer can ONLY be corruption, for why else would you do something that costs, in fact, taxes, the people of Australia to a private corporate entity - private bankers - (who have plenty enough) - against the interests of us, when it is supposed to be OUR government, with politicians who do OUR bidding, and OUR will - US - the people of Australia. Why does the media not question or report this simply obvious fact. The banks do NOT have the money - we have the power and therefore the money. The banks are given by law the power to print money they don't even have. It's called fractional reserve banking and it is a criminal corsortium of private interests conspiring to indebt and criminally tax the unaware people's of Australia and many other countries where this system is duplicated.

Posted by: Mick at 12-12-2008 17:51