❓ Shadow Treasurer Wyatt questions Treasurer Nahan about the financial impact of Moody's downgrade of Western Australian Treasury Corporation's debt rating. Nahan responds that the impact is estimated at two basis points, costing $267,000 until July 2016 and $800,000 on $7 billion of debt.
AnsweredQoN 24Legislative Assembly
QuestionView source ↗
DEBT RATING — MOODY'S INVESTORS
SERVICE
24. Mr B.S. WYATT to the Treasurer:
I refer to the downgrade of the debt
rating of the Western Australian Treasury Corporation by Moody's
Investors Service on 8 February this year, making Western Australia the lowest
rated state in the commonwealth.
(1) What will be the financial
impact of this decision on the cost of debt for Western Australian taxpayers?
(2) How much debt is expected to be
issued or rolled over in the coming 12 months?
SERVICE
24. Mr B.S. WYATT to the Treasurer:
I refer to the downgrade of the debt
rating of the Western Australian Treasury Corporation by Moody's
Investors Service on 8 February this year, making Western Australia the lowest
rated state in the commonwealth.
(1) What will be the financial
impact of this decision on the cost of debt for Western Australian taxpayers?
(2) How much debt is expected to be
issued or rolled over in the coming 12 months?
AnswerView source ↗
Thank you very much. The question is
a very relevant one.
(1)–(2) To
put it in context, we do roll over debt—both new debt and existing
debt. The Western Australian Treasury Corporation has advised me that over the
next 12 months, we will roll over or issue about $7 billion in new debt. As
indicated, the capital cost of borrowing has come down. I think last year we
discussed at estimates that it was about four per cent. At the midyear review,
it was 3.4 per cent and I have been advised—this is very interesting;
at least the member for Victoria Park might find it interesting—that we
think our marginal additional cost of borrowings is three per cent.
Mr
B.S. Wyatt : The financial cost?
Dr
M.D. NAHAN : I know; I am going through this in great detail. A lot of the
downgrade was already factored in; the differentials were determined on the
market and trades. But so far the WA Treasury Corporation estimates that the effect
of the downgrade is two basis points—0.02 of a per cent.
Mr
D.J. Kelly : So it doesn't matter then.
Dr
M.D. NAHAN : No, I am not saying that. He asked me a question and I am
answering it.
It is 0.02; it is not large. We
estimate that the existing rolling over of debt and new debt for this calendar
year up until 1 July 2016 will be $267 000—that is not millions; it is
thousands—and of that $7 billion, it will be $800 000, assuming a two
basis point change.
a very relevant one.
(1)–(2) To
put it in context, we do roll over debt—both new debt and existing
debt. The Western Australian Treasury Corporation has advised me that over the
next 12 months, we will roll over or issue about $7 billion in new debt. As
indicated, the capital cost of borrowing has come down. I think last year we
discussed at estimates that it was about four per cent. At the midyear review,
it was 3.4 per cent and I have been advised—this is very interesting;
at least the member for Victoria Park might find it interesting—that we
think our marginal additional cost of borrowings is three per cent.
Mr
B.S. Wyatt : The financial cost?
Dr
M.D. NAHAN : I know; I am going through this in great detail. A lot of the
downgrade was already factored in; the differentials were determined on the
market and trades. But so far the WA Treasury Corporation estimates that the effect
of the downgrade is two basis points—0.02 of a per cent.
Mr
D.J. Kelly : So it doesn't matter then.
Dr
M.D. NAHAN : No, I am not saying that. He asked me a question and I am
answering it.
It is 0.02; it is not large. We
estimate that the existing rolling over of debt and new debt for this calendar
year up until 1 July 2016 will be $267 000—that is not millions; it is
thousands—and of that $7 billion, it will be $800 000, assuming a two
basis point change.
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