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Corporate bond development too slow: Robb

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CANBERRA, Nov 21 AAP

November 21 2012, 1:44PM

Shadow finance minister Andrew Robb says if the coalition wins government it will examine ways to stimulate the development of a much-needed retail corporate bond market.

Mr Robb told a conference in Melbourne on Wednesday recent steps to allow retail investors to buy and sell listed Commonwealth Government Securities (CGS) was a "useful start".

While the development of a retail corporate bond market was widely supported by the federal government, the securities regulator and market participants, progress had been "very slow".

Since the 2008-09 global financial crisis only a handful of new corporate bonds had been issued, and mostly by domestic banks.

"However, demand has gone in the opposite direction," Mr Robb told the University of Melbourne Faculty of Business and Economics conference.

"The underperformance of equity investments and increasing number of investors requiring more conservative and/or diverse investment portfolios has led to greater demand for retail corporate bonds, driven by financial planners and the self-managed super industry."

Mr Robb said fund balances in the self-managed superannuation industry alone already exceeded $478 billion and were growing at more than $30 billion a year.

This growth made a compelling case for the development of a deeper, more liquid and sustainable retail corporate bond market, he said.

"The retail corporate bond market should be comparable with the equities market. It should be as quick and as simple to purchase bonds as equities," he said.

"It makes no sense to have very simple access to one type of investment, equities, yet have almost no access to lower-risk corporate bonds."

He also said for corporate debt issuers, a local market should mean cheaper and easier access to funding over time.

While companies were happy to raise equity funding in the local market, they tended to go offshore to issue debt - particularly to the US - despite the more expensive documentation process.

"In the meantime much can be done quickly to breathe real life into the development of a sustainable retail corporate bond market," Mr Robb said.

"The coalition stands ready to take such action."