Trends in Australia's debt and equity (Financial flows)

Australia’s financial flows have been trending in favor of debt since the late 1990s, largely due to the country’s stable macroeconomic environment and growing government investment. Debt has since become the primary source of finance for businesses, with equity flows falling to all-time lows in terms of both volume and value. The trend in debt has been largely driven by the emergence of Australia’s corporate bond market. This has allowed larger companies to access debt finance and has also allowed new players such as foreign banks to enter the market. Debt has also become more attractive to investors due to its higher yields relative to equities. The trend in equity has been driven in part by the lack of attractive deals, as well as investors’ preference for debt. Equity funding has also been hit by the Australian Government’s decision to increase taxes on capital gains and on dividends. As a result, investors have been more likely to pursue debt investments as they are more tax-efficient than equity instruments. Overall, Australia’s financial environment has favored debt over the last few decades, and this trend has only continued to gain traction in recent years.