The Australian Government’s very low level of government debt sets the context for Australia’s debt management policy. Australia’s debt management policy seeks to achieve two objectives: supporting financial market efficiency; and achieving an appropriate balance of cost and risk for the Government. To achieve these two objectives the Government uses two instruments: physical bond issuance and financial derivatives (primarily interest rate swaps). Use of these two instruments allows the two targets to be independently managed. Financial market efficiency requires the issuance of sufficient Treasury bonds to support the Treasury bond futures market. Given this profile of physical issuance, the Government enters into interest rate swaps to achieve an appropriate balance between costs and risks. Given the low level of debt in Australia, particular attention is given to catering for short term cash management trends and the specific issues raised by indexed debt.