* per cent of gdp average over : 1998 – 2007 2008 – 2013 private sector 5. 0 1. 7 banks * * 5. 4 −2. 0 other financials −0. 2 −2. 0 non - financials 1. 6 3. 8 n / a 1. 6 −0. 1 2. 1 – resources sector public sector ( * ) excluding households and the rba ( * * ) adjusted for the us dollar swap facility in 2008 and 2009. includes securitisers. sources : abs ; rba as a result, banks have scaled back the pace of offshore debt issuance, with net wholesale debt issuance averaging 1−2 per cent of gdp over 2008−2013 compared with average net debt issuance equivalent to about 5 per cent of gdp over the previous 10 years ( graph 3 ). 4 for a more in - depth discussion of developments in banks ’ funding, see stewart c, b robertson and a heath ( 2013 ), “ trends in the funding and lending behaviour of australian banks ”, rba research discussion paper no 2013 - 15. the australian banking sector also continues to raise short - term debt offshore, including through us money market funds as well as foreign currency deposits from customers including foreign central banks. in part, this bis central bankers ’ speeches graph 3 the slowdown in credit growth post - crisis has been particularly evident in the low growth of lending to businesses. this is related to the second key development in the composition of australian capital flows over recent years : an increase in net capital inflows directly to the corporate sector, rather than the funding being intermediated by the banking sector. net inflows to private non - financial businesses have stepped up from an average of around 1½ per cent of annual gdp in the 10 years prior to the global financial crisis to around 4 per cent of annual gdp in the post - 2007 period. investment in the resources sector has been the important driver of this shift. since 2011, around 70 per cent of foreign investment in the australian private non - financial sector has been directed to the resources sector ( graph 4 ). as outlined in previous rba work on the topic, a significant share of the very large increase in investment in resource projects has been funded through foreign direct investment in the form of retained earnings. 5 to the extent that resource companies have also used external funding sources, they have generally accessed offshore debt markets directly, rather than obtain funds through the domestic banking sector. 6 reflects the fact that

should increase the resources sector ’ s export revenue. the combination of higher revenues and lower capital expenditure outlays could be expected to lead to an increase in resources sector profits and, particularly, an increase in the share of these profits that are paid out as dividends to investors. given that the resources sector is largely foreign - owned, this would be accompanied by an increase in dividend payments to foreign investors ( an outflow on the net income component of the current account ). although the resources sector ’ s transition from investment to production will likely result in a reduction in net capital inflows to the sector, the effect on the australian dollar is more nuanced. while capital inflows to the resources sector may be expected to fall ( and thus reduce demand for australian dollars ), this will also be associated with declining imports to the sector, as resource investment has relied heavily on imported capital and labour. moreover, the balance of payments records these notional foreign direct investment flows as capital inflows ( and imports on the current account ) even though the respective flows may have been predominantly in us dollars. the ( still substantial ) part of the capital inflow that represented an actual transaction in australian dollars was that needed to pay for their workforce in australia and the often small share of the assembly done locally. additionally, to the extent that resource firms ’ revenues are primarily denominated in us dollars and their shareholder base chooses to be paid dividends denominated in us dollars, these flows will have no net direct influence on the exchange rate. only those flows needed to pay for the operations in australia, to pay dividends to the australian shareholder base and taxes to the australian government will result in purchases of australian dollars. the net result of all of this is that we might expect to see reduced capital flows and reduced demand for australian dollars as the resources sector moves into the production phase. finally, on the outlook for investment inflows to the public sector, while the foreign ownership share of australian government debt has declined somewhat from its peak, it remains at a historically high level. sovereign investors tend to be relatively slow to change their portfolio allocations. hence we might expect these holdings to be relatively sticky. recent capital inflows to the sector suggest that demand for australian government debt remains robust. the extent of any additional purchases will depend in part on the extent of further foreign exchange reserve accumulation by other central banks. one source of potential additional demand for government securities is from japanese investors, who