1990s. after the financial crisis, government debt began to increase. federal government debt has continued to do so, although state government debt has stabilised over the past couple of years, a feature which i will discuss later. private sector issuance has evolved somewhat differently. it grew quite rapidly from low levels in the lead up to the financial crisis, but growth has been more modest since then. both demand and supply factors influenced that change. demand for private sector securities waned in the midst of the crisis in response to a general reduction in risk - taking, although that weakness in demand really has only been persistent in the case of asset - backed securities. supply was also affected by regulatory requirements that sought to place banks on a sounder footing and reduce their exposure to wholesale markets. how important is the private bond market compared with alternative sources of finance? currently, the value of private bonds outstanding is around $ 1. 1 trillion. this includes issuance by financial and non - financial corporations. that stock is equivalent to around two - thirds of the value of companies on the australian stock exchange. so the bond market is an important source of finance. listed graph 1 https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 2 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba even so, it's also worth noting that a large share of finance in australia is intermediated via banks and other financial institutions. [ 1 ] so, it is not surprising that about half of private sector bonds have been issued by financial entities, mostly banks ( graph 2 ). the value of funds raised by nonfinancial corporations through fixed income markets is much less than the $ 1. 1 trillion i previously mentioned. in contrast, total bank credit amounts to about $ 2. 6 trillion. graph 2 we can also view this through the funding composition of non - financial corporations in the national accounts, published by the australian bureau of statistics ( abs ) ( graph 3 ). intermediated debt is much greater than non - intermediated debt for that part of the economy. https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 3 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba graph 3 another way to cut the data is to compare bonds issued domestically with those issued offshore.

a large rise in investment. https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 11 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba graph 11 a broader measure of debt that captures other sources of funding, including from banks, is gearing ( which is the ratio of net debt to the book value of equity ). up to 2013, the gearing ratio of the major miners had increased significantly, and for some companies it was at quite high levels ( graph 12 ). https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 12 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba graph 12 the larger - than - expected declines in commodity prices ( since 2012 ) had a marked effect on pricing in the bond markets and on the behaviour of resource companies. the sharp rise in bond spreads on resource company debt from 2015 into early 2016, in response to the large declines in commodity prices, signalled the concerns in these markets about the health of some resource companies ( graph 13 ). https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 13 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba graph 13 not surprisingly, mining companies responded to those signals in commodity and bond markets by reining in their costs significantly ( graph 14 ). part of that may well have come from gains in efficiency that followed from earlier investment in capacity. but much of it was driven by a reduction in expenditure on a wide range of things. indeed, cutbacks across the resources sector, in addition to the planned reductions in mining investment, had a very noticeable effect on aggregate demand in western australia and queensland over recent years. the associated reductions in spending allowed the mining companies to reduce the extent of their debt, and repayment of bonds has played an important role in that process. https : / / www. rba. gov. au / speeches / 2017 / sp - ag - 2017 - 08 - 09. html 14 / 16 8 / 9 / 2017 fixed income markets and the economy | speeches | rba graph 14 conclusion this has been quite a tour of fixed income markets. they constitute a non - trivial share of financing, not just for