Commercial Paper Australia 2025: Rates, Trends & Regulatory Changes

Commercial paper has quietly become a go-to funding tool for Australian corporations seeking short-term liquidity. As we head into 2025, shifting economic headwinds, regulatory tweaks, and digital innovation are reshaping how this financial instrument is used across the country. Whether you’re a CFO at a mid-tier company or an investor looking for yield, understanding commercial paper’s evolving landscape is key.

What is Commercial Paper and Why Does It Matter?

Commercial paper (CP) is an unsecured, short-term debt instrument issued by corporations to meet immediate funding needs—think payroll, inventory, or bridging seasonal cash flow gaps. Maturities usually range from 7 to 180 days, making CP an attractive alternative to traditional bank loans or overdraft facilities. In 2025, the Australian CP market is estimated to exceed $40 billion in outstanding volume, with major issuers spanning sectors like energy, retail, and infrastructure.

• Cost-effective: CP often comes with lower interest rates than business loans, especially for blue-chip issuers with strong credit ratings.

• Flexible: Terms can be tailored to suit specific liquidity needs, offering businesses an agile way to manage working capital.

• Investor appeal: Money market funds, super funds, and high-net-worth individuals are drawn to CP for its higher yields compared to term deposits.

2025 Regulatory and Market Developments

This year has brought notable changes to the Australian CP landscape. The Australian Securities and Investments Commission (ASIC) introduced enhanced transparency requirements for CP programs in late 2024, now in full effect. Issuers must provide real-time disclosures of outstanding amounts and maturity profiles, improving market confidence and comparability. Additionally, the Reserve Bank of Australia (RBA) adjusted its repo eligibility criteria, allowing a wider range of AA- and A-rated CP to be used as collateral in open market operations—a move designed to boost market liquidity after the volatility seen in 2023.

Key 2025 trends include:

• Digital issuance platforms: More issuers are leveraging blockchain-based platforms for faster, lower-cost CP issuance and settlement. ANZ’s pilot with a syndicated digital CP in early 2025 has set a new benchmark for the sector.

• Green and sustainable CP: ESG-conscious investors are driving demand for CP that funds environmentally sustainable projects. Several Australian utilities issued green CP in Q1 2025, attracting significant oversubscription.

• Interest rate dynamics: With the RBA holding the cash rate at 4.35% as of March 2025, CP rates have remained attractive for investors, generally 25-80 basis points above term deposit rates for equivalent maturities.

Who Should Use Commercial Paper—and How?

While CP is a powerful tool, it’s best suited for larger, creditworthy companies with strong balance sheets. Issuers typically need to maintain high credit ratings and robust investor relations. For smaller businesses, access remains limited due to higher perceived credit risk and minimum issue sizes (often $5 million+ per tranche).

Practical use cases in 2025 include:

• Retail chains smoothing seasonal cash flow: A leading supermarket group issued $200 million in CP to stock up for the 2025 Easter rush, repaying the notes within 60 days after sales peaked.

• Infrastructure developers bridging project finance: A renewable energy consortium used short-term CP to cover construction costs while awaiting finalisation of a government grant.

• Super funds diversifying cash holdings: Large industry superannuation funds are allocating more to CP for its liquidity and yield advantage over traditional cash products.

Risks and Strategic Considerations

Despite its advantages, commercial paper is not risk-free. Investors face issuer default risk, and in turbulent markets, liquidity can dry up quickly—as seen during the brief credit squeeze in late 2023. Regulatory changes now require issuers to maintain robust liquidity backstops, such as committed bank lines, to bolster investor confidence.

Before issuing or investing in CP, consider:

• Creditworthiness and market reputation of the issuer

• Transparency of disclosures and reporting

• Access to alternative funding sources in case the CP market seizes up

• Alignment of CP maturities with cash flow cycles