Another day, another rort in Government exposed.
“On Thursday, The Australian Financial Review revealed ANZ had engaged Herbert Smith Freehills and Allens to conduct separate investigations into the alleged inappropriate trading and broader workplace issues within the bank’s markets division.
The Australian Securities and Investments Commission is also investigating whether the bank forced an increase in the interest rate on a $14 billion government bond sale in April 2023.
ANZ traders allegedly deliberately forced down the price of bond futures contracts, which increased the cost of borrowing money by the government.
The bank has also been forced to admit that it may have inflated the volume of its trading in government bonds, figures that had been submitted to the Australian Office of Financial Management.
Instead of the $137.6 billion in trades for clients it had initially submitted for the 12 months to the end of June 2023, the bank had actually worked on $83.2 billion in transactions, ANZ told the agency.
The AOFM oversees government debts, and selects the largest traders to work on issuances.”
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How pathetic are Treasury?
They are being played by the private banks who make them look like fools.
The sad thing is it’s the taxpayer and mortgage holders who suffer as a result of poor behaviour in financial markets.
Treasury employees are the highest paid staff in the bureaucracy.
They should have the skill set to issue Government bonds and not have to outsource it.
Furthermore they should be sharp enough to know when they are being played by the banks.
Economics Legislation Committee – 06/11/2024 – Estimates – TREASURY PORTFOLIO – Department of the Treasury
Senator RENNICK: My questions are in regard to the current investigation taking place with ANZ manipulating markets in regard to government bonds. Is it true—I’ve read it in the media—that it’s $100 million a year that the taxpayer pays to the banks for the syndicated fees?
Mr Philp: I might turn to my colleagues and see if we have any information on this one. The AOFM is normally within the responsibilities of the Macroeconomic Group, and your particular question may go to the ASIC investigation that we wouldn’t be privy to, but I’ll just check—
Senator RENNICK: I would have thought that, with you being markets and dealing with markets and bonds, it would make sense for it to go in markets.
Ms Kelly: I would just like to say the allegations are being investigated by ASIC at the moment, so it wouldn’t be appropriate for us to comment while the allegations are still under investigation.
Senator RENNICK: Okay. But can you comment on this: do you or do you not pay fees to the banks to trade government bonds or issue government bonds to private banks?
Ms Kelly: AFOM use banks in relation to their arrangements when they’re issuing in different capacities, so ANZ was used in a capacity in relation to this matter. But, again—
Senator RENNICK: I’m asking a general question here. It’s not just to ANZ. I’m looking at—
Ms Kelly: Yes, banks are used by AOFM when they do issue—
Senator RENNICK: The question I want to get to is: why don’t we use the RBA and save ourselves $100 million in fees to private banks? The large private banks already get a lot of largesse anyway. I’m not sure why we have to use private banks to do our bond issues. I would have thought our RBA or Treasury could do their own bond issues.
Ms Kelly: Again, this would be a question for AOFM because it’s in relation to how they undertake their borrowing activities.
Senator RENNICK: Right. I’ve worked in private companies, and we do our own bond issues. We don’t have to pay another company to do it.
Ms Kelly: Yes.
Senator RENNICK: I don’t know why the government has to outsource everything. As you’re Treasury, I would have thought you should have the skill set to do it yourselves.
CHAIR: I think they’re looking for a question, Senator.
Senator RENNICK: I guess my question is: why don’t you have the skill set to do it yourselves?
Ms Kelly: AOFM are separate to Treasury, and they have a range of activities they undertake. Some are done in house and some use syndicates of banks in different ways. So, again—
Senator RENNICK: You’re talking about the Australian Office of Financial Management?
Ms Kelly: Yes.
Senator RENNICK: Why are they separate to Treasury? I would say they either come under Treasury or are part of the RBA.
Ms Kelly: They’re within the portfolio.
Mr Philp: They’re one of our portfolio agencies, but they operate under their own mandate within the Treasury portfolio, much like how, for Markets Group, the ACCC, ASIC and APRA are portfolio agencies of ours but are independent agencies that operate in their own sense.
Senator RENNICK: Right.
Mr Philp: Senator, if you like, I’m happy to take the question on notice, and we can try to come back to you on that.
Senator RENNICK: Yes, if you could—because I’d like to know why they need to if they’re operating independently or in their own little group and why they don’t have the skill set. I’ve worked in companies that have a treasury department with the skill set so we don’t have to pay $100 million in fees to the private banks to do what we should be doing. You guys are all well paid. Are you paying again on top of that to issue bonds? Given that we have a trillion dollars of debt and we’re to have debt for a long time, this is a skill set we should have our heads around, especially given the investigation with ANZ. I’ll leave it at that.
