Local bond market high on agenda among business leaders

Many business leaders believe a local bond market would boost growth and productivity.

Australian business leaders continue to place the need for a local securitisation market high on their agenda to promote economic growth and productivity.

Many believe Australia’s major banks should play a role in standing behind a local bond market that provides funding, with the lenders often shying away from providing major ­corporate loans.

A local bond market has been the subject of debate for years. A view in the market is that the cost of debt in Australia is a handbrake on productivity, and some point out that the major banks have not grown their lending business since 2010 because they are so risk adverse.

In 2010, a large number of commercial property loans soured in the wake of the global financial crisis, causing a number of lenders to be more cautious.

According to figures from the Reserve Bank, since 2022 bank lending to medium-sized businesses increased, yet the value of loans to small and large businesses has remained largely stagnant at around $750bn.

Some question whether a bond market would work as it did in places like the UK in what is a small country and when the ­Australian dollar is not a reserve currency.

Some also have blamed the move by banks to restrict corporate lending on a heavy-handed approach by the Australian Prudential and Regulation Authority on cases such as the failures in the ANZ markets business over non-financial risk management practices and risk culture.

This comes after claims of inappropriate behaviour at the bank that included allegations of bullying and substance abuse, ­although findings suggested it was not widespread.

The prudential regulator forced ANZ to carry an additional $1bn of capital, including the bank’s existing $750m buffer.