Australia’s capital markets: What’s changed?

Shifting dynamics between public and private capital markets have become a focal point for regulators globally. We take a look at ASIC’s recent discussion paper on Australia’s evolving capital markets and the AICD’s perspective.

In February 2025, the Australian Securities and Investments Commission (ASIC) released its discussion paper, Australia’s evolving capital markets: A discussion paper on the dynamics between public and private markets. The AICD recently provided a submission in response after consultation with members and broader stakeholders.

Australia’s changing capital markets

The discussion paper and accompanying research report (Report 807) identify several recent trends in Australia’s capital markets, including:

• A decline in the number of new listings and increase in delistings on the ASX;
• The rapid growth of private markets, which has made it easier for private companies to access capital;
• The changing nature of companies, which has altered the attractiveness of public markets;
• The potential for future failures in the private credit market.

ASIC has invited feedback on the drivers behind some of these changes and whether further regulatory intervention may be needed.

Global trends

The discussion paper finds that Australia is not alone when it comes to the downturn in listing activity – the number of public companies in major public equity markets around the world has declined over the past two decades. This includes the US, where the decline began in the 1990s, and the UK, where the global financial crisis in 2008 also saw a downturn in the number of listed companies.

Regulatory responses globally have varied: as the discussion paper notes, some regulators have eased disclosure requirements (such as the US) while others (such as the UK and EU) have moved to simplify the listing process.  

What’s driving these changes?

ASIC suggests Australia’s downturn in IPO volume and listed entities may be cyclical, rather than primarily due to regulatory settings.

This sidesteps the clear message we are hearing from directors: Regulatory overload is making public markets less attractive.

Regulatory accumulation

Although regulatory burdens weigh on companies in both private and public markets, it is particularly heavy in the case of listed companies. This is unsurprising when we consider not only regulation specific to listed entities (for example the ASX Corporate Governance Principles & Recommendations and stringent continuous disclosure obligations, among others) but also a growing statute book on topics such as cyber and data security, climate reporting and financial services regulation.

In fact, the passage of 32 bills in Federal Parliament on the final sitting day of 2024 alone was a stark reminder of the extent of this regulatory accumulation.

Shareholder class actions and an increasingly complex stakeholder environment

The real risk of shareholder class actions and an increasingly complex stakeholder environment are also making listing, and staying listed, less attractive. We understand from our members that these factors are contributing to a decline in the number of well-qualified directors seeking roles on listed boards and instead opting for private company boards where they can have a greater focus on strategic, rather than compliance matters.

For example, listed companies – and individual directors in particular – are facing heightened scrutiny from proxy advisers, institutional investors and media. This scrutiny extends to a wide range of matters - from business operations and strategy to environmental, social and governance issues.

These pressures, coupled with the increasing availability of private capital, alter the relative benefits of Australian public and private markets.

Regulatory approaches to support healthy capital markets

An economy-wide approach to better regulation

We know that well-designed, balanced regulation can provide an enabling environment for business – providing certainty on guardrails and protections for consumers and investors. Other major trading partners such as the US, UK and EU are each moving ahead to tackle excessive regulation, recognising the shift that is needed to address sluggish growth across developed economies

The AICD, in its submission and recent Election Platform, has advocated for an economy-wide approach to ease regulatory accumulation. This includes following the UK lead in measuring and reducing the cost of regulation on businesses, with the UK having committed to a 25 per cent cost reduction from baseline by the end of the current term of Parliament.

ASIC is also exploring ways to refine the listing pathway and has established the ASIC Simplification Consultative Group to improve how regulation is approached. Both are welcome developments. The AICD, via its Chair, is an active participant in the Simplification Consultative Group.

A measured approach to private markets

The discussion paper considers whether further intervention in private markets is needed, given some of the risks ASIC outlines when it comes to illiquidity, opacity and valuation uncertainty.

While there may be some merit in greater transparency, our submission cautioned against creating additional compliance burdens that may stymie private capital investment in Australia, particularly at a time of lagging productivity and subdued economic growth.

The goal should be proportionate and targeted regulation across the board – not elevating private market regulation to the same high level as public markets.

Next steps

ASIC has indicated it is using consultation on its discussion paper to guide its work program over the next 12 months, including considering whether additional regulatory intervention is needed.

The AICD will continue to actively engage with the regulator, our members and broader stakeholders as ASIC’s work develops.