Most Australians park their money in super, buy shares on the ASX, or leave it in the bank. But there's a third part of Australia’s financial system growing fast underneath all of that: private credit.
So what is private credit?
Private credit is lending outside of banks and public bond markets. Businesses borrow directly from a private fund, rather than going to big banks like CBA or NAB for a loan. For these funds, they earn interest at a floating rate, closely following Australia’s interest rates - with a premium of course. For borrowers, they get flexibility that banks can’t usually offer, like long loan periods, and fewer restrictions. Loans range from senior secured debt to mid-market companies, to hard asset-backed lending across real estate, agriculture and infrastructure.
Why is it booming in Australia?
Post the GFC, banking regulation made it harder for banks to give out certain types of loans, particularly to SMEs and in commercial real estate. This gap was filled by private credit, with AUM rising to $234.5 billion in 2025, a 500% increase over the past decade. Australia's $4.3 trillion superannuation system also needs somewhere to put its money, and private credit's longer-term, income-generating nature suits super funds well.
How does it compare to the US?
The US market is far more mature, with global private credit AUM projected to reach US$3 trillion by 2028, dominated by fund giants like Blackstone and Apollo. Australia is earlier in that cycle and more conservative, with lower leverage and smaller deals. The US is a bit riskier, lending heavily to AI and tech companies secured against software and IP rather than hard, physical assets. If those companies struggle, there's not much to recover. Australia has largely stayed anchored to tangible asset-backed lending, using these tangible assets as collateral if things go wrong.
What's the catch?
Liquidity. Private credit is relatively illiquid – you can't sell your position like shares. Also, the industry has been growing mostly during a period where borrowers have been able to repay their loans, so a genuine credit decline would test these loans in ways they haven’t been before.
Private credit’s momentum is real. Super funds are allocating more, retail access is widening, and the gap left by banks shows no signs of closing. For Australia, the question isn't whether private credit becomes a mainstream part of the financial system, it's how quickly.
