Australia's debt capital markets split into "two halves" over the year, according to Blake Dawson banking and finance partner Paul Jenkins.

A good start to the year was propelled by solid Australian economic growth, stabilising financial market conditions and an interest rate environment better than the rest of the world.

However, because of the European sovereign debt crisis, the troublesome resource super-profits tax (RSPT), and potential election before the end of year, debt issuance slowed down and stopped.

The Australian debt capital markets managed to amass $57.33 billion in the 2009-10 financial year, but this was lesser than the $67.25bn a year earlier.
The majority of the debt raised in 2009-10 was driven by the government, which issued $39.91bn worth of bonds, with Australian financial institutions next at $16.13bn and corporates with $1.29bn. The corporate issuance rose from $917m in 2008-09, but the level of activity did not match the high expectations that corporate bonds were on the way back.

"In terms of debt capital markets, it was really a year of two halves," Mr Jenkins said.

"In the first half, there was an increased sense of optimism and that continued into the first quarter of this calendar year.

"But since then there has been a significant triple whammy of a sovereign debt crisis, the RSPT and now the expectation of an election.

"That has created a lot of uncertainty in the markets . . . If we have that (election) by August and September, then I think we will see a resurgence in the market and get back to the optimism there was in the first half. In the market at the moment, there is some pent-up issuance and some pent-up demand from investors looking to get back into the market, but there are these three factors at play in the market right now."