HSBC Australia chairman Graham Bradley (pictured) has predicted households will continue to save a high share of their incomes for years to come, sparking a surge in retail demand for corporate bonds.
In a trend that has created major challenges for retailers, households have increased the share of income saved from close to zero to near 10 per cent since late last decade.
Mr Bradley said on Monday these high savings rates were a "new normal," and could remain elevated for another five years.
With interest rates at record lows, he also said financial markets would be required to develop new types of savings products. In particular, he expects to see more retail financial products to be based around corporate debt.
"What it means is a lot more household savings, which will then go in search of yield in a low interest rate environment - a challenge for markets and a challenge for regulators" Mr Bradley said in Sydney.
"Blue-chip, globally-operated corporations will have better credit ratings than many, many banks, and many, many sovereigns," he said.
"I think that will lead to the need for the development of corporate debt markets in order to supply the yield that so many Australians will be looking for outside of equity markets. I think it will take quite a long time for retail investors to come back to equity markets."
The federal government is also expecting strong growth in the corporate bond market, and last week introduced legislation that it hopes will make it easier for blue-chip companies to borrow from households by issuing bonds.
While the financial services industry is welcoming the changes, Mr Bradley said the push for more corporate bonds could expose small investors to new risks.
"That will mean a more innovative package of debt products, which I think will be a challenge for regulators," he said.
He referred to the sale of "mini bonds" before the global financial crisis, a type of highly complex debt product sold to about 30,000 retail investors in Hong Kong.