Significant Issues and Future Outlook

Contents
Executive Summary
Highlights 2016/17
Chairperson’s and Chief Executive Officer’s Report
Five-Year Summary
Performance Against Targets
Overview
About Western Australian Treasury Corporation
Board of Directors
Organisational Structure
Performance
Economic Environment
Financial Solutions for Clients
Financial Markets Activity
Processes, People and Infrastructure
Significant Issues and Future Outlook
Budget for 2017/18
Estimated Borrowing Program
Borrowing Strategy for 2017/18
Disclosures and Legal Compliance
Other Legal Compliance
Other Financial and Corporate Governance Disclosures
Financial Statements
Contact Details

Western Australian Treasury Corporation must remain flexible and adaptable to respond to the ever-changing economic environment to deliver the financial requirements of the State.

General global uncertainty and international events will continue to impact the domestic economy. Geo-political events, including ongoing Brexit negotiations and tensions with North Korea, along with the Federal Reserve’s hiking cycle and the prospects of emerging market economies, such as China, will have a major influence on financial markets. Despite these uncertainties, they are not expected to materially impact Western Australian Treasury Corporation (WATC) and its ability to deliver the ongoing financial requirements of the State.

Budget for 2017/18

	$’000
Income
Interest on Investments	52,500
Interest from Authorities	1,661,513
Fee Income	1,728
	1,715,741

Expenses
Interest on Borrowings	1,662,529
Depreciation/Amortisation	970
Borrowing Related Expenses	4,303
Administration Expenses	17,346
	1,685,148

Profit before Income Tax Equivalent	30,593
Income Tax Equivalent Expense	9,178
Profit for the Period	21,415

Estimated Borrowing Program for 2017/18

The sourcing of WATC’s funding is subject to conditions in the various markets and the market mix during the year may be amended as necessary to meet WATC’s pricing, liquidity, lending and capital usage targets.

The figures in the following table are based on the projected 2017/18 Borrowing Program that was set in the May 2016 release of the 2016/17 State Budget. With a State election held in March 2017, the 2017/18 State Budget will be released on 7 September 2017. The new 2017/18 Borrowing Program will be updated on the WATC website at that time.

Estimated Term Debt Borrowing Program for 2017/18¹

	$m	$m
Term Funding Requirement
New Lending to Clients		4,900
Less: Pre-funding		(1,000)
Projected Maturities
Bonds	2,045
FRNs	3,265	5,310
Total Term Funding Requirement		9,210

¹ Based on the projected 2017/18 Borrowing Program set in the May 2016 release of the 2016/17 State Budget.

Borrowing Strategy for 2017/18

In order to meet the State’s funding and debt management requirements for 2017/18, WATC plans to:

issue a new long benchmark bond line maturing in 2028

issue a new 5-year maturity floating rate note and continue to issue floating rate notes into outstanding lines in response to investor demand to accommodate the term floating rate borrowing requirements of clients.

In addition, WATC will continue to:

issue across the yield curve to fund lending to clients

enhance the liquidity in existing lines of benchmark bonds by: maintaining sufficient volumes on issue to retain benchmark bond status

supporting these securities in the market
issuing through its Fixed Interest Market Making Panel, by tender, private placement or syndication

maintain approximately $1.5 billion to $3.0 billion of short-term paper on issue through domestic Short-Term Inscribed Stock and the offshore Euro Commercial Paper Program to meet short-term lending and liquidity funding requirements

monitor opportunities to issue through its Euro Medium Term Note Program and other offshore markets

transact in derivative products to meet asset and liability management requirements and to generate floating rate funding for clients

ensure that debt issuance undertaken through domestic and offshore borrowing programs is issued in a manner satisfying the requirements for exemption from interest withholding tax under Section 128F of the Income Tax Assessment Act 1936.

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Annual Report 2017

Significant Issues and Future Outlook

Western Australian Treasury Corporation must remain flexible and adaptable to respond to the ever-changing economic environment to deliver the financial requirements of the State.

Budget for 2017/18

Estimated Borrowing Program for 2017/18

Borrowing Strategy for 2017/18

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