Personal insolvencies are becoming more common as Australia’s economy lags, government figures show, which one financial adviser has warned will “flow onto business”.
The Australian Financial Security Authority last week released its quarterly report on the rate of personal insolvencies in Australia.
Most capital cities, as well as large swathes of Queensland, saw an increase in the number of recorded insolvencies in the three months to June 2019.
While actual numbers remain relatively low, the percentage changes demonstrate the proportionate size of any change.
The biggest percentage increase was recovered in Hobart, which soared by 63.5 per cent in the quarter. Greater Tasmania also posted a sharp increase, surging by 20.2 per cent.
Double-digit percentage growth in the number of insolvencies was also seen in the ACT (up by 12.7 per cent).
Despite the difference in population size, Brisbane recorded more insolvencies in the quarter than Melbourne.
At the other end of the spectrum, greater South Australia saw the number of insolvencies fall by more than a third (down by 38.1 per cent), while regional areas of the Northern Territory also saw numbers fall by almost 30 per cent.
A breakdown for each state and territory and its capital city is listed at the bottom of this article.
Businesses to feel pinch
Commenting on the figures to My Business sister publication Nest Egg, Ryan Watson, CEO of financial advisory firm Tribeca Financial, said that he was not at all surprised, and warned businesses that they would continue to feel the impact.
“Our economy hasn’t been travelling well for a number of years,” Mr Watson said.
“Consumers are feeling the pinch, and when this happens, they tighten their belts, which [un]enviably flows onto business.”
Mr Watson said that “forever rising” costs of living, coupled with low wages growth, has seen spending dry up, “which is hurting business”.
He urged businesses to be conservative in their financial forecasts to avoid falling into troubles themselves.
“Understanding the real/true business case behind a business is critically important,” Mr Watson said.
“While we may think a certain type of business will attract a consumer, without the right research before we make the investment, it can lead to financial ruin, i.e. make sure you built a great business case before you start a business.
“Another critical piece of advice given when I started my business was to conservatively forecast each year’s financials and make sure you review the ‘forecast versus receipted’ at least monthly throughout the year.”
It follows separate findings by Prushka Fast Debt Recovery, which last month expressed alarm at a “worrying spike” in the number of applications to wind up a company in the 2019 financial year, which it attributed to business insolvencies.
The Reserve Bank of Australia cut interest rates in June and July this year in a bid to kickstart growth in the economy.
Insolvencies in June 2019 quarter — state and territory breakdown
Greater Sydney saw an 8.1 per cent increase in the number of insolvencies last quarter, concentrated in the Campbelltown area in the city’s south-west. The rest of NSW saw a 5.4 per cent rise, with the largest number of new debtors centred in the Lower Hunter region.
Sydney total insolvencies: 1,170
Regional NSW total insolvencies: 767
Greater Melbourne posted a 2 per cent rise, with the Casey-South region the most affected. The rest of Victoria actually saw fewer insolvencies, easing by 2.4 per cent. Of those new ones recorded, Geelong accounted for the highest number.
Melbourne total insolvencies: 847
Regional Victoria total insolvencies: 287
Greater Brisbane saw a modest increase of 0.3 of a percentage point for the quarter, with the Springfield and Redbank area in the city’s north the most affected. Insolvencies rose much faster across the rest of the Sunshine State, up by 5.1 per cent, centred around Ormeau and and Oxenford.
Brisbane total insolvencies: 897
Regional Queensland total insolvencies: 1,088
On the west coast, insolvencies actually shrank in the greater Perth area by 9.4 per cent. Of those recorded, Rockingham and Wanneroo accounted for the highest number. Across the rest of the state, numbers increased by 2.5 per cent, led by Bunbury.
Perth total insolvencies: 657
Regional WA total insolvencies: 161
The greater Adelaide area saw a 3.7 per cent lift in the number of insolvencies last quarter, concentrated in the Onkaparinga area. But the rest of the state plummeted by 38.1 per cent, with the highest number in the Murray and Mallee region.
Adelaide total insolvencies: 312
Regional SA total insolvencies: 78
Hobart was the nation’s worst performer, with insolvencies soaring by 63.5 per cent, concentrated in the city’s north-west. A strong rise of 20.2 per cent was also recorded across the rest of Tasmania, with the biggest contributor being the Burnie/Ulverstone area.
Hobart total insolvencies: 85
Regional Tasmania total insolvencies: 101
The greater Darwin area posted a 5.3 per cent rise in insolvencies, with suburban areas contributing more than their city-based counterparts. Across the rest of the territory, the rate actually fell by 27.8 per cent, led by Alice Springs.
Darwin total insolvencies: 60
Regional NT total insolvencies: 13
A 12.7 per cent rise in insolvencies was recorded in the nation’s capital, to a total of 80. Belconnen contributed the highest number.
Source: Australian Financial Security Authority
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.