Corporate bond market review makes 12 recommendations to enhance investment

By Jon Bragg

October 26 2021
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Twelve recommendations have been made to support the development of a more active corporate bond market in Australia.

The House of Representatives standing committee on tax and revenue has issued a list of 12 recommendations that it says will revive Australia’s undeveloped corporate bond market.

The committee’s report, titled The Development of the Australian Corporate Bond Market: A Way Forward, also aims to raise awareness about the benefits of corporate bonds for both investors and issuers.

Among the key recommendations of the report are lowering the minimum investment parcel for corporate bonds to $1,000, conducting a review of the licensing regime for credit rating agencies to minimise access barriers and streamlining disclosure requirements for the issuing of simple corporate bonds.

In the report’s foreword, committee chair and Liberal MP Jason Falinski compared Australia’s corporate bond market to New Zealand’s “deeper, broader and more liquid” market despite an obvious size disparity.

This, Mr Falinski said, was the result of “ongoing regulatory failure and institutional obstructionism” in Australia.

“This report seeks to call out this neglect and obstruction, not because it benefits the financial markets or will enable a few tech billionaires to add another zero to their bank balance but because we need to do this for two people: Working Australians who are approaching retirement and need to regularise their retirement incomes, and growing businesses that want to stay in Australia but have little or no access to venture capital, and like Atlassian, Afterpay and Resimed, are forced to relocate overseas, taking their investment, intellectual property, best people and income with them,” Mr Falinski wrote.

“Having invested so much in their development through R&D grants, our education system and other infrastructure, we as a nation lose that investment overseas where tax gets paid in the US, Europe or not at all.”

Other recommendations include ensuring investors have access to timely and useful information about corporate bonds, amending regulations to allow for the early redemption of simple corporate bonds and reviewing the Corporations Act to increase the availability of trustees for the retail bond market.

“It is the hope of this committee that the government will commence implementing recommendations as soon as possible even if done separately as each recommendation will result in unleashing the considerable power of the corporate bond market in Australia,” Mr Falinski said.

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