On December 10, it finally happened. Instead of demanding an interest payment from the government in return for lending it money, a group of investors offered to pay the government in order to lend it money.
Naturally enough, the offer was accepted.
The government needed A$1.5 billion which it promised to repay on March 26.
It sought tenders. What was the lowest return an investor would accept to lend it the money?
It wasn’t short of offers. It fended off $8.2 billion of bids, and some of them were prepared to accept very low returns indeed.
The lowest was -0.01%. The minus sign indicates that, instead of the government paying the lender a return for lending to it, the lender would pay the government a return for the privilege of lending to it – a perfectly-legal backhander if you like.
- ^ -0.01% (www.aofm.gov.au)
- ^ AOFM (www.aofm.gov.au)
- ^ The government has just sold $15 billion of 31-year bonds. But what actually is a bond? (theconversation.com)
- ^ Joshua Gans (twitter.com)
- ^ in the other direction (www.rba.gov.au)
- ^ levies (en.wikipedia.org)
- ^ more than doubled (personal.utdallas.edu)
- ^ payola (www.history-of-rock.com)
- ^ Spotify may soon dominate music the way Google does search — this is why (theconversation.com)
- ^ record ban (trove.nla.gov.au)
- ^ The Long and Winding Road (www.huffingtonpost.com.au)
- ^ needed the other (en.wikipedia.org)
- ^ original draft legislation (www.accc.gov.au)
- ^ final legislation (parlinfo.aph.gov.au)
- ^ ACCC Digital Platforms Inquiry, final report (www.accc.gov.au)
- ^ two-way value exchange (joshfrydenberg.com.au)
Authors: Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University