Covid-19 presents Australian Government with a once in a lifetime opportunity to cut fat : Cutting funding to College Of Law Sydney can save AUD 3 Billion, other areas of waste can be easily identified



by Ganesh Sahathevan

It is obvious that the Government's Covid-19 stimulus will have to be large, and it is equally obvious that funding the stimulus will require an increase in taxes. Meanwhile there is plenty in Government funding that is wasteful and unproductive. That waste must go, and the fat should be incised quickly in order to minimise the burden on the taxpayer.

The New South Wales and Australian legal establishment's College Of Law Sydney is one example and the method outlined below for estimating the quantum of the waste  can be used as a quick and easy way to estimate how much can be saved from other outflows of taxpayer cash in other areas of spending.

The College Of Law Sydney has been shown to cost the taxpayer approximately AUD 50 Million in FEE HELP funding.

That annual outflow is worth in present value terms approximately AUD 3.35  Billion , when discounted at the current 15 Year Government Bond Yield of 1.49%. Cashflows into perpetuity are often approximated over a period of 30 years, and hence the use of the 15 year rate. The other rates listed by Bloomberg can be used as substitutes, depending of the nature of the spending.

Government Bond Yields

NAMECOUPONPRICEYIELD1 DAY1 MONTH1 YEARTIME (EDT)
GTAUD2Y:GOV
Australia Bond 2 Year Yield
2.00103.000.25%-4-40-1263/20/2020
GTAUD5Y:GOV

Australia Bond 5 Year Yield
2.75109.590.35%0-29-1153/20/2020
GTAUD10Y:GOV
Australia Bond 10 Year Yield
2.50112.991.11%-30+20-743/20/2020
GTAUD15Y:GOV
Australia Bond 15 Year Yield
2.75115.791.49%-26+44-593/20/2020

Reserve Bank of Australia Rates

RATECURRENT1 YEAR PRIOR

RBATCTR:IND

RBA Cash Rate Target
0.251.50






































Other areas of spending will be identified in the coming weeks.
END



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