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Northern Territory Treasury Corporation Annual report 2013-2014



Northern Territory Treasury Corporation Annual report 2013-2014


Department of Treasury and Finance reports; Reports; PublicationNT




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Northern Territory Treasury Corporation -- Periodicals; Finance, Public -- Northern Territory -- Periodicals

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Northern Territory Treasury Corporation4 Chairmans Address Over the course of the year, the global economy has generally improved largely due to progress in the major developed economies. In Australia, overall economic growth has accelerated over the past year. NTTC has benefited from the subdued volatility in financial markets and a low interest rate environment with the successful term bond issuance and strong returns in aggregate on the investment portfolios it manages on behalf of the Central Holding Authority (CHA). The Territory economy outperformed the national economy in 2013-14 with gross state product estimated to have increased by 5.6percent to $20.96billion compared to only 2.9percent nationally. This was driven by strong growth in private housing investment, equipment investment and exports. While private construction investment is forecast to decline slightly, Territory international exports are expected (as forecast by Deloitte Access Economics) to grow by an annual average of over 12percent between 2013-14 and 2017-18. Overall, forecasts estimate that the Territory economy will grow at an average annual rate of 5.1percent between 2013-14 and 2017-18, which is the highest growth rate of the jurisdictions. NTTC borrowed a total of $935 million in 2013-14, comprised of $542million of maturing debt and $393 million of pre-funding for the 2014-15 borrowing program. This borrowing was spread across three major bond issues maturing in 2021, 2024 and 2026. The combined strong investor demand on longer dated bonds and the low outright interest rate encouraged NTTC to focus on long-term fixed rate issuance. The outcome of this activity saw the weighted average duration of debt on issue increase from 4.0 years reported in June 2013 to 4.4 years in 2013-14. This occurred while the weighted average cost of borrowing for the 2013-14 year of 4.23percent reduced the overall weighted average cost of borrowing on the total portfolio of debt from 5.32 to 5.21percent. The extension of debt on issue at a relatively low interest rate was supported by both the Advisory Board and the Department of Treasury and Finance. In terms of investment activities, world share markets delivered their second consecutive financial year of double-digit returns. Fixed income returns improved but still underperformed global markets over the year. As a result, the Conditions of Service Reserve (COSR), which invests with a long term perspective, returned 14.98percent in 2013-14 or 2.08 percentage points above its benchmark. COSR is now 1.91 percentage points above its benchmark over the 10 year period. The Medium Term Investment Fund (MTIF) also performed well during the past year, producing a weighted average return of 6.72percent, or 4.04 percentage points above the benchmark return of 2.68percent. Both the COSR and the MTIF returned well above the NTTCs 4.23percent cost of borrowing for 2013-14. The investment portfolio managed by NTTC on behalf of CHA is composed of range of secure investments, a significant proportion of which is in short-term instruments, also performed well above its benchmark. In 2013-14, the portfolio returned 2.97percent, or 0.28percentage points above the benchmark return of 2.69percent.