Canberra bid to bolster corporate bond market
SMALL investors are a step closer to being able to more easily lend their savings to blue-chip companies, with the release of new laws aimed at bolstering the retail corporate bond market.
The federal government will on Friday publish draft legislation designed to deepen the domestic corporate bond market by tapping billions in household savings.
The local market for corporate bonds has long been neglected because of the expense and difficulty of issuing debt to retail investors.
For companies, this has often meant raising debt overseas is more attractive. It has also meant there is a shortage of relatively safe financial assets that offer a fixed stream of income, as bonds do.
To stimulate the market, Treasury proposes to allow firms to issue bonds under a simpler prospectus when targeting retail investors, while also easing the liability burden on directors.
Acting Treasurer Penny Wong said the changes would also aim to direct more of the nation's $1.4 trillion super pool into the hands of Australian firms, rather than have companies borrow overseas.
"A vibrant corporate bond market is key to harnessing our national superannuation savings and enabling us to domestically fund more productive investment in our economy and, in turn, reduce our reliance on offshore wholesale funding markets," Senator Wong said.
Australian super funds typically hold less than 15 per cent of assets in bonds, compared with an average of 55 per cent for pension funds across developed world economies.
Stimulating the bond market is also seen as a way to lift Australia's chances of becoming a regional hub for financial services, and was a recommendation of a 2010 official review by former Macquarie banker Mark Johnson.
"These reforms are an important part of promoting Australia as a leading financial services hub and securing our reputation as one of the most attractive investment destinations in the world," Senator Wong said.
From March this year, it is expected that small investors will be able to trade Commonwealth government bonds on the Australian Securities Exchange.