Australia

With the Australian state of New South Wales' (NSW) high business diversity and a solid percentage of government involvement in the corporate world it is no surprise that the state's Treasury introduced the Treasury Corporation Act of 1983. With this act, T-Corp was established -- shifting the financial management of the public sector from the hands of the government to an external organ that could work outside the borders of bureaucracy.

T-Corp was originally established to arrange borrowings for state entities. Today it has the authority to carry out, participate in, and advise on the management of liabilities and assets of the government, public authorities and other public bodies.

According to Wayne Jarman, the company's CEO: "T-Corp is based on economies of scale. We are outside the state bureaucracy and achieve this by consolidating different authorities who normally would have done their borrowing separately. We have 17 electricity authorities that essentially bank with us, we have a water authority and about 130 other government businesses."
Wayne Jarman, CEO of the New South Wales Treasury, or T-Corp

Not only does T-Corp make it possible to centralize state borrowing; it also has powers that enable the company to transact in investments of any kind within the public sector. In addition, it has the Treasury's approval to enter into such "financial adjustments" as swaps, futures, options and forward rate agreements, both on TCorp's own behalf and on behalf of its clients.

The concept of economies of scale of the public sector's financial services has proven to be so successful that other countries have decided to copy the model. "It started out being rather an unusual model, but it has now been adopted by New Zealand, and the UK has just established one," Jarman says. "Even the Canadian states are studying it."

T-Corp's efficiency is an attractive quality to investors and borrowers in the public sector. At the end of 2001, some 60 clients had borrowings from T-Corp amounting to $23.4 billion. Today, T-Corp is one of Australia's major financial institutions, with total assets of $27 billion.

T-Corp's focus, to-date, has mainly been on the domestic market. Its activity in global exchange bonds has been inhibited by a very tight interest rate differential with the US, and a weakening Australian dollar. These factors have kept international fund managers from dealing in Australia fixed income products. Despite this, T-Corp was successful in raising $915 million in 2001 through 11 individual offshore capital markets transactions.

A majority of these deals came from the Japanese retail sector. "Japan is important to us," states Jarman unequivocally. "In 1997 we did close to 22 public issues to this sector. Security houses like Daiwa, Nomura and Kokusai have all led a number of issues for us in the past. The deregulation of the financial markets in Japan is taking hold, albeit slowly, because of the size of their economy and the crossholdings of many of the large banks. Australia's size allows it to be a bit more flexible and we can restructure faster as a result. But I do see progress in Japan, and I definitely see Japanese clients as important to us now and in the future."

Looking ahead, Jarman sees T-Corp becoming even more heavily involved in public companies with private partnerships. Even though NSW is moving slower towards privatization than other Australian states like Victoria, there have been significant changes here also. "We are behind many of the major infrastructure projects and privatization efforts of the state," he emphasizes. "We have just sold some rail assets and we were also involved with the privatization of TAB, Australia's largest gambling concern."

T-Corp can compete on the same level as private sector companies in the corporate financial debt markets. "Borrowing from us costs about the same as borrowing from the private sector," he points out. Working with an attractive zero risk benefit, T-Corp's credit rating is the highest in Australia.

Looking at NSW's future economic climate, T-Corp expects to have its hands full over the next few years. The state's economy is expected to grow 2.75 percent in 2002, driven by both the private and public construction sectors. The state's asset acquisition program will total $5.58 billion, an increase of 11.5 percent from 2001.

With the current competitive level of the Australian dollar providing a cushion for exporters, the share markets remain firm while house prices are rising steadily to underpin general wealth levels. In this positive outlook, T-Corp is at an advantageous position to assist international investors interested in Australia's most business-minded state.

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