New figures have revealed a stark warning on the solvency of many Australians, as soaring costs bite into their ability to keep their head above water.
In 2017, Australia saw a noticeable spike in personal bankruptcies, up 6.1 per cent to over 32,000. That, according to credit information firm illion, follows a 4.7 per cent rise in 2016.
Bankruptcies had bottomed out at around 29,000 in 2015.
“Consumer debt levels are rising steadily in Australia as a result of record mortgages and a surge in everyday essentials such as utilities, petrol and healthcare. These factors, combined with weak wage growth, are putting pressure on the wallets of Australians,” said illion CEO Simon Bligh.
“Major events such as natural disasters not only strain government coffers but have a negative impact on the local economy, particularly small and medium-sized businesses, as well as consumer confidence. While it’s impossible to anticipate every possible risk, we encourage everyone to have an emergency fund to draw on in these instances to pay unexpected bills or damages.”
A breakdown of the numbers reveals that Queensland had the highest number of bankruptcies last year, accounting for 9,500 or around 30 per cent. This was followed by NSW on 9,100, and then a sizeable drop to third place which was Victoria with 6,100.
As would be expected, the smallest states and territories also had the smallest numbers of bankruptcies. The ACT and Northern Territory combined matched Tasmania’s 800.
Sadly, the figures could not be broken down to determine what proportion of those bankruptcies were self-employed.
Warning to retailers, franchises, suppliers
The news comes as credit insurance and debt collection agency Atradius warned that retailers and franchise businesses are at the greatest risk of going under in 2018, and as such should pay particularly close attention to their finances.
“Mortgage stress is causing Australian consumers to spend less money on retail items like clothes and furniture,” said Mark Hoppe, managing director ANZ, Atradius.
“Australia’s private debt is among the highest in the world and, as banks keep issuing more and higher mortgages, the impact on the retail market will be felt even more keenly. The Australian retail market has already seen a number of high-profile insolvencies from Dick Smith to Laura Ashley, David Lawrence, and Marcs.”
Mr Hoppe warned that the early part of the year typically sees a spike in insolvencies, especially among retailers, as the slower sales of post-Christmas period begins to bite. And the strain on retailers is likely to filter through to their suppliers.
He advised taking a proactive approach to secure funding to cover the leaner periods of the year, with a raft of options including credit insurance, invoice finance and short-term lending available to help businesses navigate temporary cash flow constraints.
Top 10 suburbs for personal bankruptcies: 2017
- Baldivis, WA (103)
- Pakenham, VIC (93)
- Craigieburn, VIC and Pimpama, QLD (88)
- Upper Coomera, QLD (85)
- Blacktown, NSW (82)
- Caboolture, QLD (77)
- Orange, NSW and Southport, QLD (75)
- Dubbo, NSW and Point Cook, VIC (74)
- Morayfield, QLD (72)
- Kirwan, QLD and Berwick, VIC (71)
Figures courtesy of illion
- Opinion: The best and worst of customer service
By Adam Zuchetti
- Analysis: Is Twitter dead for business purposes?
By Adam Zuchetti
- Analysis: The misnomer of bank regulation and loan costs
By Adam Zuchetti