Capital markets describe the set of arrangements that match borrowers to lenders. Sometimes the arrangement is direct, sometimes it takes place through an intermediary like a bank, and sometimes it takes place through a market like the stock market. This chapter deals with such external financing of expenditure in Australian history while noting that governments, households and businesses also finance much of their expenditure internally. Over the period 1788-1860 Australia developed a financial system well adapted to its economic structure. The Great Depression experience of the 1930s played a formative role, not because of the collapse of financial institutions, but because governments formed a view that they needed stronger tools to manage the economy more effectively. Australian corporate borrowing surged after liberalisation but has subsequently stabilised, with the gearing ratio of debt to equity rising from about 0.45 to more than 1 in the 1980s before falling sharply and stabilising at about 0.5.