Question

Why does Australia have a small bond market? (you can dig up some data from the Australian National Accounts statistics or from the World Bank Global Financial Development Database (GFDD) if you wish to quantify how small and compared to one or two meaningful countries) Do you think that this will this change in the future?

Answer 1

It has been observed by international standards that Australian non financial corporations rarely access bond markets to finance investment and operations. Bonds are mainly issued through international markets. Corporate bond issuance in Australia is under 1 per cent of nominal GDP, compared with 3 per cent in the United States.

It is mainly because for large loans , Australian businesses would prefer to go yo banks rather than access bond markets. They also rely on issuing equities. This should change in future because a healthy bond market is important for a nation's economy. It can also provide a healthy competition to the banking industry.