There are three ways a business (bs) can get funds from a source outside the bs in Australia. These are financial institutions, private placement and financial markets. Financial markets are one of the three vital ways of borrowing funds. These are places where the people and institutions with surplus funds can make transactions directly with the bses' that want loans and investments. The two main financial markets are the money market and the capital or securities market. The money market makes transactions in short-term debt instruments, or marketable securities. The capital market trades long-term securities such as; bonds and shares.

There are a number of major participants in the financial markets of Australia. They include bank, finance and insurance companies, merchant banks, superannuation/mutual funds and the government through the Reserve Bank of Australia (RBA).

Banks: The Australian banks are the most important institution as they provide an...