Fixed Income

Sizing Australias debt markets

15/05/2014

Peter Fullerton

Peter Fullerton

Credit Analyst

Most investment professionals have a reasonable grasp of the size and composition of the Australian equity markets and the investment opportunities they provide. However, ask the same question about the size of Australian debt markets and most people would struggle to have the same level of clarity. Common perceptions are that Australian debt markets are significantly smaller than equity markets and largely dominated by debt issued by the banks and the Commonwealth Government. The reality is that Australian debt markets have grown significantly since the Global Financial Crisis (GFC) and currently capitalised at A$1,144bn compared to the All Ordinaries Index at A$1,477bn (as at December 2013). The expansion of Australia’s debt market has provided investors with greater depth but more importantly greater breadth of investment opportunities, particularly in terms of the various components of bank debt and a growing number of non-financial or corporate issuers of debt securities.

In this paper we outline the development of the Australian fixed income securities market and the major drivers of its growth. In addition, we compare this with the size of the domestic equity market as well as key offshore markets to place these developments in context.

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