June 2013



The Australian Securitisation Forum (ASF) continues to make a critical contribution to the securitisation industry by connecting issuers, investors and other key stakeholders.  It is a pleasure to introduce its flagship publication again.


When I last wrote for this journal, I noted a number of encouraging signs for the Australian securitisation markets, and I’m pleased to see these have continued apace.   Demand for high-quality Australian residential mortgage-backed securities (RMBS) has remained strong, with a great start to 2013 – having recorded the best first quarter for issuance since 2007.


I was also encouraged by recent comments from Standard & Poor’s that the Australian RMBS market is on track to have its highest level of issuance since 2008 and underlying mortgage pools have performed well in recent years.  This year, we have seen both new and familiar faces in this market.  In March, mortgage aggregator AFG successfully completed its first deal, and more recently IMB launched its first transaction since 2010.


As treasurer, of course I am very pleased to see such market developments.  Since the deregulation of our financial system in the 1980s and 1990s, securitisation has been one of the key drivers of competition in the mortgage market.  Global financial market conditions have improved markedly, but it is largely a testament to our own economic performance that investors – in particular, overseas investors – have renewed confidence in Australian RMBS products.


I’ve always been of the view that our RMBS market was a victim of “brand damage” inflicted by the dislocation of the US subprime market. Regardless of the cause, Australia’s RMBS market was under enormous pressure, which is why I announced, following the collapse of Lehman Brothers, the initial A$4 billion investment in triple-A rated RMBS market by the Australian Office of Financial Management (AOFM) to assist smaller players keep competitive pressure on the major banks.


The success of the programme has been clear.   All up, the AOFM has invested A$15.5 billion in prime Australian RMBS since 2008.  We have supported 67 securitisation deals, helping 20 smaller lenders raise a total of A$45 billion.  But more than that, the programme has allowed smaller lenders time to adjust their funding models to a post-global financial crisis world, and has kept Australian securitisation market infrastructure in place which may have otherwise been lost.


However, as I stated from my first announcement back in 2008, the AOFM programme was always designed as a temporary measure.  You only have to look overseas to see that permanent government involvement in these markets, no matter how well intentioned, can result in adverse outcomes over the longer term.  Given the continued improvement in the market, it is the government’s view that now is the time to wind down our support for this market. Strong demand has meant that the AOFM has scaled back and out of many transactions, and hasn’t directly invested in a deal since August last year.


The government of course remains the holder of a significant portfolio of prime RMBS, and will do so for some time. While the AOFM has some discretion to sell securities, it will generally only consider a sale where it is at an acceptable price and would continue to support a market recovery.   I am confident that the industry is well placed to continue to move forward on a solid and sustainable footing, in large part because of the steps this government took during the financial crisis and due to the economic outperformance that we continue to deliver.


Thanks again to Chris Dalton and his colleagues at the ASF, and I hope you enjoy this edition of the Australian Securitisation Journal.


June 2013

The Hon. Wayne Swan MP


Deputy Prime Minister and Treasurer of Australia