Australia’s private credit market is expected to experience strong growth in 2026, potentially bolstered by further interest rate increases from the Reserve Bank of Australia. According to Peter Szekely, managing partner at Tanarra Credit Partners, these rate hikes would support returns on floating-rate private credit investments. Tanarra Credit Partners is an Australian credit-focused alternative asset manager. The company provides tailored financing solutions to mid-market businesses.
The Australian private credit market saw a 9 per cent expansion in 2025, reaching $225 billion. This growth was fueled by increased interest in the asset class from various investors, including family offices, high-net-worth individuals, retail investors, and superannuation funds. Despite positive sentiment and structural tailwinds supporting growth, increased allocation to private credit has intensified competition.
This heightened competition led to margin compression and more flexible terms for borrowers, which capped yields in 2025. Szekely noted a tightening of spreads by 50 to 75 basis points over the past 12 to 18 months for similar credit quality, mainly in larger syndicated transactions. However, mid-market and lower mid-market deals have not experienced the same level of contraction.
Szekely anticipates that interest rates will remain elevated throughout 2026 due to persistent inflation. This positions the Australian private credit market to offer attractive returns compared to overseas markets like the US. Demand for private credit is expected to remain robust this year, particularly from Australia’s $4.3 trillion superannuation funds, which continue to attract capital due to the strong labour market.
