Australia continues to pay interest to Russia on $8b worth of Treasury Bonds

Treasurer Josh Frydenberg has revealed one way Russia is still benefiting from Australia’s economy.

Australia will continue to pay interest to Russia on $8 billion worth of Treasury bonds but Josh Frydenberg is adamant the he has found other ways to limit the financial gain that comes with owning a slice of our debt.

Calling it a “very minor amount”, Mr Frydenberg said the government had found other ways – through its introduction of sanctions – to keep Russia from benefiting any further on the bonds it holds.

“The important point is that the Russian government will not be able to sell those bonds to Australian entities because of sanctions,” Mr Frydenberg said.

“(But) we are not defaulting our bonds.”

With mounting sanctions potentially impeding Russia’s economy, Mr Frydenberg said what the Russian government was “trying to do” with its foreign reserves was “interesting”, but ultimately Australia would work smarter.

Treasurer Josh Frydenberg says Australia will not default on its interest payments to Russia on Treasury bonds. Picture: NCA NewsWire / Gary Ramage Picture: NCA NewsWire / Gary Ramage

Mr Frydenberg said that in recent days, the Russians were trying to reduce or sell their foreign reserves to transfer that into domestic currency in order to strengthen their domestic economy.

“What the Russians have done is they’ve said to all Russian companies for them to sell their foreign reserves, their foreign currencies and transfer that into roubles,” he said.

“They’ve increased their policy rate – the equivalent of their cash rate – to 20 per cent. And that’s a doubling, a more than doubling, of what they had.

“They’ve closed their stock market, which had fallen by more than a third. Their stock market is not working and they have refused to pay coupons on their bonds.”

Australia has introduced sanctions on 350 Russian individuals, and a host of Russian banks. Picture: NCA NewsWire / Gary Ramage

Australia has introduced tough sanctions on 350 individuals, and some key industries in lock-step with allies over the Ukrainian conflict.

Australia has also joined other western countries in pledging to remove some Russian banks from SWIFT, to ensure the banks are disconnected from the international financial system.

Outside of the government bonds, Mr Frydenberg confirmed that total trade tied to Russia was less than 0.2 per cent of overall trade.

But, the biggest impact was likely to be on petrol prices which could flow through to inflation.

“In the last two weeks, we have seen the oil price increase above $100 a barrel for the first time since 2014 and 2015,” Mr Frydenberg said.

“Higher petrol prices does flow through to inflation … The expectation will be that this will impact the price of petrol.”