Media Releases

Media release: 1 June 2000

HOUSE ECONOMICS COMMITTEE TO INVESTIGATE COMMONWEALTH'S POOR FOREIGN EXCHANGE MANAGEMENT

The House Economics Committee will follow up the Audit report on major problems with the Commonwealth foreign exchange risk management. The report by the Auditor-General states that in 1998-99 the Commonwealth's foreign exchange exposures were of the order of $A8.4 billion of foreign currency transactions but no exchange risk management was in place.

The audit points out that unlike normal commercial practice the Commonwealth has a devolved and decentralised approach to managing foreign exchange risk.

The audit concluded that foreign exchange risk was not effectively and prudently managed by the audited agencies. In fact, none of the agencies audited had any stated policies in relation to foreign exchange risk management or consistent management practices.

The Committee Chairman, David Hawker MP, said 'The Auditor-General's report drew some stark conclusions on the Commonwealth's management of foreign exchange risk exposures that demand investigation.'

Agencies investigated in the audit were Defence, AusAID, Department of Foreign Affairs and Trade and the Department of Finance.

The Committee's work will build on the ANAO audit, not duplicate it, said Mr Hawker. Other areas of investigation include:

• Why no systems and procedures were in place to identify Departmental exposures; analyse the extent of these exposures; assess their impact and take steps to cost-effectively manage the resultant risks;

• Why Departmental agencies have not made a proper assessment of foreign exchange risk; and

• Why a proper assessment of the ways to manage foreign exchange risk as part of purchasing was not made.

It is as though the floating of the Australia dollar in 1983 did not register with Commonwealth agencies said Mr Hawker.

The audit provides some classic examples of the poor foreign exchange management leading to a cut in the number of helicopters and scrapping an order for missiles for the Anzac Ships; and the use of promissory notes without the approval of parliament. Mr Hawker said the Committee would consider some case studies highlighted in the audit, as well as others that no doubt will come to light.

In its work the committee will be looking for input not only from the audited agencies but from the major foreign exchange managers and others with skills in this area.

The committee will advertise the inquiry seeking submissions from interested organisations and individuals.

Ends // 1 June 2000

Further information:
David Hawker MP (Chairman) 02 - 6277 4100 (Parliament House)
Beverley Forbes (Secretary) 02 - 6277 4582
Email: EFPA.Reps@aph.gov.au

Committee Membership 39th Parliament

Chairman: Mr David Hawker MP
Deputy Chairman: Mr Gregory Wilton MP
Members:
Mr Anthony Albanese MP
Ms Anna Burke MP
Ms Teresa Gambaro MP
Mrs Kay Hull MP
Mr Mark Latham MP
Mr Christopher Pyne MP
Hon Alex Somlyay MP
Dr Andrew Southcott MP

For a copy of the Audit Report No 45 - Commonwealth foreign exchange risk management practices

Contact the Australian National Audit Office (02 6203 7685) or their website http://www.anao.gov.au

Or Government Info Shops or their website http://www.ausinfo.gov.au

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