Stream Three: Secure the long-term safety and sustainability of our financial system
Develop a deep and liquid corporate bond market
The Gillard Government will facilitate the trading of Commonwealth Government Securities (CGS) on a securities exchange in Australia, as part of its broad agenda to foster a deep and liquid corporate bond market, promote Australia as a leading financial services hub and boost our reputation as one of the most attractive investment destinations in the world.
The Treasury will also finalise reforms to further reduce the amount of red tape associated with issuing corporate bonds to retail investors, including further streamlining disclosure requirements and prospectus liability regulations.
A vibrant corporate bond market is critical to putting competitive pressure on bank lending rates to business, and to harnessing our national superannuation savings so we can domestically fund more productive investment in our economy, via both the banking system and the corporate sector, reducing our reliance on offshore wholesale funding markets.
Allowing CGS to trade on a securities exchange will provide retail investors with a more visible pricing benchmark for investments they may wish to make in corporate bonds issued by Australian businesses, as well as help further encourage retail investors to consider diversifying their savings through investments in fixed‑income products like government and corporate bonds.
Consistent with the Government's agenda to promote competition between financial markets operating in Australia, the Treasury will report to the Government on the cost and suitability of alternative market exchanges on which CGS could trade by 1 January 2011.
The Treasury will also finalise its work to build on the recommendations of the Australian Financial Centre Forum and report back by 1 January 2011 on the most appropriate design of reforms to better align disclosure for retail corporate bond issues with the process already allowed for share entitlement offers, which provides a very high level of protection for investors, as well as reduced transaction costs for issuers.
In the 2010-11 Budget, the Government announced initial measures to streamline disclosure for businesses borrowing from retail investors.
The Government also provided a new tax incentive to promote personal saving, by encouraging Australians to consider savings products like corporate bonds as a way to diversify their investments.