Key Takeaways
- • The Reserve Bank of Australia estimates private credit outstanding in Australia at about A$40 billion, or roughly 2½ per cent of total business debt, according to its October 2024 bulletin.
- • Global private credit assets under management have quadrupled over the past decade to US$2.1 trillion in 2023, per the IMF (2024).
- • The RBA judges risks to financial stability from Australian private credit to be contained for now, while noting that global concerns center on leverage opacity and interlinkages with banks and private equity.
- • Estimates of Australian private credit vary widely: the RBA puts it at A$40 billion, EY at A$188 billion, and Preqin/AIC at A$1.8 billion, reflecting differing scope.
- • The main liquidity channel of concern is committed but uninvested capital, which could trigger synchronised capital calls on pension funds and insurers in a large economic shock.
Summary
The Reserve Bank of Australia (RBA) has introduced a new estimate of private credit outstanding in Australia, placing it at around A$40 billion. According to the bulletin, this represents about 2½ per cent of total business debt, which includes intermediated lending and corporate bond issuance. The estimate is based on data collected by the Australian Prudential Regulation Authority (APRA) and London Stock Exchange Group (LSEG), capturing lending to Australian businesses facilitated by asset managers from pooled investor money, along with direct superannuation lending as part of syndicated loans.
The RBA notes that Australian private credit has grown rapidly and faster than business debt over recent years. Growth slowed in 2024 but remained roughly 2 percentage points above business debt growth. Domestic private credit funds account for around 70 per cent of outstanding private credit and have contributed most to lending growth. Superannuation funds invest mainly indirectly, through private credit funds, though the RBA's estimate does not capture non-syndicated direct lending by these funds.
Estimates of the Australian market differ considerably in scope. The EY estimate of A$188 billion captures privately disclosed or reported assets under management of private debt funds and other non-bank investors, while the Preqin and Australian Investment Council estimate of A$1.8 billion covers assets under management of closed-ended funds. The RBA attributes the gap largely to differences in coverage and structure, since APRA data include only the Australian-resident portion of registered financial corporations' business lending.
Globally, the IMF (2024) reports private credit AUM of US$2.1 trillion in 2023, with North America accounting for around 70 per cent of private credit raised since 2008 and Europe about one-quarter, according to PitchBook (2024). On leverage, North American private credit funds carry debt-to-asset ratios near 35 per cent, below the roughly 50 per cent of leveraged loan and high-yield issuers, though end borrowers are more highly leveraged than public-market counterparts.
The RBA identifies liquidity and interconnectedness as the key channels of potential stress. Closed-end structures restrict redemptions, but committed yet uninvested capital could lead to large, synchronised capital calls during an economic shock, forcing pension funds or insurers to sell other assets. Banks are significant providers of leverage to private credit funds, and strong ties exist with private equity, as most borrowers are partly controlled by PE firms and around three-quarters of private credit assets are managed by umbrella firms also active in private equity. The RBA concludes that risks to Australian financial stability appear contained for now, though regulators continue to monitor the sector closely.
The RBA notes that Australian private credit has grown rapidly and faster than business debt over recent years. Growth slowed in 2024 but remained roughly 2 percentage points above business debt growth. Domestic private credit funds account for around 70 per cent of outstanding private credit and have contributed most to lending growth. Superannuation funds invest mainly indirectly, through private credit funds, though the RBA's estimate does not capture non-syndicated direct lending by these funds.
Estimates of the Australian market differ considerably in scope. The EY estimate of A$188 billion captures privately disclosed or reported assets under management of private debt funds and other non-bank investors, while the Preqin and Australian Investment Council estimate of A$1.8 billion covers assets under management of closed-ended funds. The RBA attributes the gap largely to differences in coverage and structure, since APRA data include only the Australian-resident portion of registered financial corporations' business lending.
Globally, the IMF (2024) reports private credit AUM of US$2.1 trillion in 2023, with North America accounting for around 70 per cent of private credit raised since 2008 and Europe about one-quarter, according to PitchBook (2024). On leverage, North American private credit funds carry debt-to-asset ratios near 35 per cent, below the roughly 50 per cent of leveraged loan and high-yield issuers, though end borrowers are more highly leveraged than public-market counterparts.
The RBA identifies liquidity and interconnectedness as the key channels of potential stress. Closed-end structures restrict redemptions, but committed yet uninvested capital could lead to large, synchronised capital calls during an economic shock, forcing pension funds or insurers to sell other assets. Banks are significant providers of leverage to private credit funds, and strong ties exist with private equity, as most borrowers are partly controlled by PE firms and around three-quarters of private credit assets are managed by umbrella firms also active in private equity. The RBA concludes that risks to Australian financial stability appear contained for now, though regulators continue to monitor the sector closely.
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