As for original post - interesting idea, poorly executed and with little to offer as an alternate to existing investment options - I will pass.
Why don't they just print the money, equivalent to the economic benefit to be derived? State bonds sounds like consolidated revenue, don't you think?
Wow.. 4.5%? I would have thought nearly double that would be about right. They are obviously hoping to get cheap money out of the retail crowd.
Kris Sayce has been warning people in his newsletter for probably over 18 months that these types of instruments would be on offer by the government and sooner or later the government will not be able to help themselves and make these "safe" assets mandatory for super funds to buy. When we have a massive financial sell off, probably just before or in the middle of the baby boomers retirement expect it to happen. Time to get into SMSF's and manage your own future people/
Yes good points , but you must consider that the NSW governments have been doing such a fine job of financial management, that how could you possibly not want to invest with them? Oh dear!! i think i just choked on my sarcasm...its too big scotty...i need more power.
Haha damn straight man, NSW government is beyond incompetent. Basically once upon a time the government broke up the transport department because it was too massive (too much red tape) into Trains, Buses and Ferries. After 10 years or longer, they decided it'd be a great idea to waste another few billion dollars restructuring and re-merging the departments. I shit you not. Geniuses at work over there in our NSW government. I can't see how they can possibly fail financially either since they have some wonderful planning /sarcasm.
Previous generations paid for the infrastructure without debt. Why is this generation the only one so keen on debt ?
No they didn't. The Sydney Harbour Bridge is a well known example of major infrastructure that took ages to pay off, but the Opera House came in 10 years late and 1400% over budget. The Snowy Mountains Scheme cost billions and was partly financed by a loan from the World Bank. The core of Sydney railway network that was part of the Bradfield plan was funded by government debt. In fact, virtually all the infrastructure we have today was build using borrowed money. Nobody just accumulates a lazy $10 billion and then sits down to work out what to spending it on. The key is balancing the debt with projected GDP increases resulting from the building of the infrastructure in the same way a business would borrow a million dollars if it could use the money to make $1.1 million in profit over the term of the loan.
How long did it take to build the bridge and pay it off? Problem is, if you invested in it at the beginning. Did you get a good rate of return? did it even keep up with inflation? Slam
Bonds ect have been used before in Oz, when I was a kid there were Aussi bonds and quite popular too and before that opera house lottery and even before that florins and or crowns can't remember just now but one was to raise funds. Think it was commemorative florin 1935. Some one please feel free to fill the gaps.
Those projects eg harbour bridge, public transport are funded on a user-pays basis. ie. the govt takes on the debt but its not the taxpayers at large who fund its repayment, its the users eg harbour bridge toll, public transport ticket prices etc. So while the debt is booked against the government, its really the users of that asset which are paying for its repayments, not the taxpayer. Toll roads are a similar example, $1 billion or whatever to build and paid back not by the taxpayer but those who choose to use it. My concern is not for these projects but the borrowing of money to fund purely public goods like a hospital upgrade (no user pays), new school (no user pays), or new roads/bridges (that arent tolled). Because the debt and repayment of these projects falls 100% onto the taxpayer.
Yes that's certainly true - no argument there - but if the government doesn't build the new school or upgrade the hospital or build a road, that constricts economic growth e.g. transport congestion costs Sydney about $4.7 billion a year in lost productivity. Bus gridlock in the two hundred-odd meters between the end of the Harbour Bridge and Wynyard costs about $13 million just by itself. Even user-pays arrangements don't always work out well if the projected user volumes fall short. If its a government project, the taxpayer has to keep paying the government's interest bill for longer and if its a public-private partnership, the government inevitably ends up bailing out the private operator and the taxpayer foots the bill anyway. So while there is a risk in the government borrowing money to build infrastructure, there is a dead-set guarantee that we collectively suffer if they don't.
What's the bet super funds will be offered attractive fees (kickbacks) to put the sheeples money into government infrastructure debt bonds? Watch this space as they say. I put my smsf into a 5 year term deposit @ 8% a bit over a year ago - > 4% odd with the NSW govt, you know where you can stick that.
Super funds already invest in government bonds via institutional offerings and auctions but they typically buy hundreds of thousands or millions of dollars worth at a time. These bonds are targeted at small investors and SMSF trustees who couldn't usually access that market - basically a reboot of the "Aussie Bonds" scheme from the 80s. Pros: - Backed by AAA rated state government - Conservative non-banking sector investment - Inflation protected bond to be issued - Money used to pay for stuff that benefits me in the long run and more inclusive of the wider community Cons: - Low rate of return - Minimum $10,000 investment is very high - No details of liquidation options (yet) Personally, that $10k minimum spend is the killer. Obviously there are administration costs in managing things but if UBank can offer a 0.28% spread on deposits to loans and still make a profit, the costs of lowering the minimum investment can't be that high. A typical IPO on the share market usually has a minimum investment of $2000 and the RBA sells bonds to individuals in $1000 increments.
6.3% At Call at Ubank for SMSF which craps over anything these govt bonds offer - although the ubank rate is variable on the downside.
