Council Minutes - Town of Cambridge

COUNCIL MINUTES
TUESDAY 28 AUGUST 2012
CR12.133 INVESTMENT SCHEDULE - JULY 2012
PURPOSE OF REPORT:
To advise the Council of the amount of surplus funds invested, the distribution of those funds
and the financial performance of each investment (ie interest earned) year to date.
BACKGROUND:
Council’s Investment Policy No. 3.2.5 allows for investing of funds into direct investment
products and managed funds which comply with both the credit risk rating and terms to
maturity guidelines as set out in the policy.
DETAILS:
Investment Portfolio Performance
At its August 2012 meeting, the Reserve Bank of Australia decided to maintain the cash rate
at 3.50% for a second month.
The Reserve Bank observed that global growth has weakened after having picked up in
early 2012. The European economy continues to remain weak although on a brighter note
China's slow down in economic growth appears to have stopped.
On the domestic front, the Australian economy's growth is close to trend, the labour market
experienced moderate growth and the unemployment rate remains low. Retail sales over
the past few months have surged and business credit growth has been strong since early
2012. Given these positive economic trends, the Reserve Bank has decided to keep interest
rates on hold although some of the major Australian banks economists believe that further
interest rate cuts will be made in the coming months
In terms of the Town’s investment portfolio, interest rates being obtained over the short term
of three months are around 4.8% with the major banks. Interest rates for securities for
periods six months are around 4.85%.
The UBS Bank Bill Index rate (an index measuring performance of interest rates over a 90
day period) was 3.50% for July 2012. The 90 day BBSW or Bank Bill Swap rate (a measure
of future interest rates) was 3.58% at 31 July 2012. As the Council’s investment portfolio is
predominantly short term cash products, the cash rate of 3.50% for July 2012 is the more
appropriate performance measure.
Against these interest rate indicators, the Town's investment portfolio outperformed the cash
rate with a weighted average interest rate of 5.38%. The weighted average investment
period of 142 days (approximately five months) compares favourably with term deposit rates
(with the major Australian banks) which for this period was an average of 4.8%.
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