NICHOLL The driver is the strength of Australia’s fiscal position. Our net issuance has fallen significantly. The question is whether this is cyclical or structural. I think it is fair to say in the last 12-18 months most of the strength in the budget position has been driven by revenue.

We continue to see high tax collection, particularly from the corporate sector. Unemployment is also low so income-tax collection is generally elevated. I don’t see this changing quickly – and this is a view I think is shared by investors.

The key for us is to support liquidity across the curve now it has been extended and has brought new investors into the market. We have signalled that we will do this by establishing fewer new maturities and focusing instead on tapping existing lines.

Having spent the last six or seven years putting a substantial amount of effort into engaging with investors and supporting their understanding of the Australian Commonwealth government securities market, we now have strong relationships with a lot of the investor base.

We don’t feel there is as much need to be face-to-face with investors as we have been, but this is no reason to ‘abandon the field’. We are thinking about how we can continue to provide updates, meaningfully.

There will be less market-development-related decision-making required on our part over the forecast period, so there will likely also be less investor analysis of how we make decisions. Management of investor expectations about our issuance and portfolio strategy has been a large part of the engagement we have conducted in recent years.

Last year we conducted about 30 teleconferences with investors all over the world in a four-week period. This worked particularly well with investors with which we have established relationships. That, together with a more straightforward message, made this a sensible approach.

It won’t be a one-size-fits-all approach, though. We will have to think differently about our engagement with other investors.

We are also thinking about developing another form of regular investor communication to cover particular topics and issues we think investors might be interested in. Our current thinking is to use a short note every few months to include updates on issuance.

One-on-one engagement will continue but the rotations will probably be longer and not as intense. Should circumstances change we are geared to change quickly in response.

NICHOLL From Europe late last year I got the impression some investors think the issuance trajectory could vary under a new government – but not dramatically. I don’t think investors generally expect to see large changes in issuance unless there is an external economic shock.

KENNEDY South Australian Government Financing Authority (SAFA) has a strategic initiative to continue to meet offshore investors regardless of how the issuance landscape may look. Pockets of investors may not be currently active but there is every chance they will come back in a few months or years.

It is not entirely implausible that 10-year Australian sovereign spreads won’t move back above US Treasuries in the foreseeable future. From this perspective we will be doing our traditional investors a disservice if we ignore them.

There will always be demand for high-quality, high-grade product from Australia, but we cannot predict from where the demand will come. From this perspective, to shun demand from any particular investor base or region would be detrimental to the relationships built by the states and the AOFM over a long period.

We are not aggressively extensive in our marketing – we don’t visit every region and we are not trying to push new boundaries into South America or Africa, say. However, we aim to ensure that, in regions where SAFA has had good exposure, existing investors are being serviced regardless of the issuance landscape.

Potentially the velocity at which issuers find new investors and markets may slow. But this does not change the need for widespread investor engagement.

TRIGONA It’s important to remember that some or indeed many AOFM investors aren’t invested in our sector. The marketing the AOFM has done in the last six years has helped us achieve our goals by getting in front of new investors. The hope is that more will start to follow the semi-government sector far more closely if they are not going to get as much supply from the AOFM.

FAJARDO In the context of the semi-government borrowing programmes increasing, having less aggregate public-sector Australian dollar issuance – given the AOFM’s reduced requirements – is positive. It wasn’t that long ago that the gross semi-government borrowing programme was higher than the AOFM’s, and we always managed to fund then. I believe the size of AOFM outstandings and its programme ensure there will still be plenty of visibility for our market.

CINQUINA Indeed. We were comfortable when the AOFM had A$50 billion (US$36.3 billion) on issue and it now has A$535 billion outstanding. It is hard to see this not being a part of global benchmarks. On this basis there will always be some level of offshore interest.

We have worked very hard on our own marketing over the past 6-7 years. Like everything, this will evolve. The fact that the AOFM won’t be issuing as much doesn’t change our marketing plans. We still need to be face-to-face with a lot of these investors.

PALMER Another thing that helps is that a lot of banks, as well as KangaNews, host events in Australia which attract global investors. They can hear a consistent story about the Australian economy, the AOFM and the semi-government sector. This gives us efficient access to a large number of investors.