Australia needs a network of investment bonds to stimulate the economy and help it avoid a deflationary spiral, according to a new report from the Bondtown network.
Key points:The report says the nation’s bond market is still at risk from a slowdown in China and a possible “hard landing” in ChinaThis is a critical time for Australia’s bond markets as a potential hard landing in China or a sudden slowdown in the rest of the world could leave it in a deep financial holeThe network, based in Melbourne, is a network that helps bond investors and investors looking for safe investments.
“We need to build a network to make sure that we don’t get a soft landing in the future,” Dr Peter Trew, the director of the network and a Bondtown board member, said.
“And I think that is a very important thing to be able to do, because if you are a bond investor, it is very hard to see what happens in the real world, so we need to have a plan for that.”
The report recommends building a network across the country to encourage bond investors to invest in the asset class and encourage investors to diversify their portfolios to other assets.
“Australia needs to build an investment bond network to build resilience into our bond market,” Dr Trew said.
He said there were some areas of the bond market where it could be helpful, such as those related to mining investment and commercial property.
“But in terms of building a whole infrastructure, it has got to be a lot more,” he said.
Bondtown says Australia’s bonds market is at risk of a soft land landing.
“There are very good reasons for doing this and I think there is a case for doing it at a certain point in time,” Dr Stephen Taylor, the board member and president of Bondtown, said on Tuesday.
“I think we are at a moment where the bond markets are in a position where they are very vulnerable to a softland landing.”
The Bondtown report says there are some areas where there is an opportunity to build the network, such a “real estate and commercial properties”.
The network will be made up of five different investment bond funds, each of which will have a board of directors and a portfolio manager, and the money will be invested in different asset classes.
Dr Taylor said the money would be used to create investment bonds and create a bond market for the economy.
“They are all in the same investment market, so it is basically just a set of bonds that can be sold to other investors in the markets,” he explained.
“What we are saying is that we are going to make it a global investment bond market.”
So we will not just make bonds that are for Australian investors, we will make bonds for foreign investors.
“In that sense it is really a global market.”
The network has also been tasked with helping bond investors who are looking to buy real estate in BondTown and commercial buildings in the CBD.
Dr Trew says it is important to diversification.
“The way the bond investors are doing their investing is really focusing on the Australian asset classes and what is driving their asset prices,” he told ABC News Breakfast.
“It is very important that you do that.”
You have got to diversified your portfolio.
“If you want to buy property in Sydney or Melbourne, or Brisbane, you are going be looking at property and commercial construction.”
That is really important to the economy.
“Investors will be able choose from the five investment bond types and be able buy or sell them to other bond investors.
Bonds purchased from the network will have to be put into an account in the BondTown Investment Platform, which is run by a team of investment professionals who will manage the account.
This means investors can make a range of investments, from buying a single bond to buying several bonds, to investing in different assets.
Dr Taylors recommendation for building a global bond market includes a new bond ETF.”
This is not something that is going to be very new, but it is something that we think is going, in fact, to be an effective way of providing liquidity for investors and to help bond markets to remain resilient,” Dr Taylor said.
The report was compiled by Dr Taylor, Mr Paul Daley, Mr Peter Kelly and Dr Peter Taylor, and Mr Stephen Taylor and Dr David Wilson.