While Martin Place has to convince the public it will crush this inflation crisis, NSW Treasurer Daniel Mookhey shows the real cost of NSW’s debt fund.
If inside-the-beltway experts are to be believed, Treasurer Jim Chalmers will announce in July a new female Reserve Bank of Australia governor, likely insider Michelle Bullock, to succeed incumbent Phil Lowe.
One interesting facet of the BoE move is that long-term interest rates declined after the surprise 50 basis point increase. This is because investors are starting to price in recessions more aggressively in response to the higher-than-anticipated jump in the short-term rates controlled by central banks. In the financial lexicon, the yield curve is inverting as the level of long-term rates falls below the central banks’ overnight policy rates.
“The hope was that we would gain more from owning those [risky] assets than we would have to pay for the debt needed to buy them. Simply put, NSW would play around in financial markets using its credit card.” There was only one vested interest that benefited from turning NSW into a huge leveraged hedge fund: the people that taxpayers were paying fees to run the money. This included TCorp and the fund managers they farm cash out to. The average total compensation per person across TCorp’s 204 staff was $283,078 last financial year. That is 81 per cent higher than the average compensation the notoriously generous RBA paid its staff over the same period.
And as Mookhey has discovered, Perrottet’s government proposed to issue another $25 billion of debt to put in a debt-reduction fund purely because he had been convinced by TCorp and others that gambling this borrowed money on global markets was a good trade. Heads fund managers win, tails taxpayers lose!
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