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The latest data shows wind-ups on the way back to pre-pandemic levels.
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NSW and building industry lead nation into insolvency
05 September 2022
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NSW businesses are going bust quicker than those elsewhere in Australia with almost half the total insolvencies in the last financial year, according to figures from Insolvency Australia.
At the same time, early numbers from ASIC showed the building industry being hit hardest, with almost one in three insolvencies over the first few weeks of 2022–23.
The Insolvency Australia data showed total appointments in NSW were 2,402 in 2021–22, up 11 per cent for the year, and director of Insolvency Australia, Gareth Gammon, expected the numbers to increase this year as wind-ups returned to pre-pandemic levels.
“The myriad economic pressures on businesses and individuals and the push by the ATO to collect debts means we are likely to see a further increase in corporate and personal insolvencies over coming months and into next year,” Mr Gammon said.
“There will be a domino effect as the pain threshold will be too much for many to bear — particularly SMEs, whose cash reserves have been exhausted by factors beyond their control.”
Provisional figures from ASIC for 2022–23 bore that out, with NSW recording 360 insolvencies over the first seven weeks of the year and a huge leap in Victorian numbers to 366 — more than double the comparable period from a year ago.
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The same figures confirmed that the hospitality and building sectors are the main casualties. Among almost 1,000 businesses that failed over the first seven weeks of this financial year, 120 were in food and accommodation services and 300 in construction.
CreditorWatch chief executive Patrick Coghlan said NSW, with 45 per cent of the total insolvencies but just 31 per cent of the population, had a “disproportionately high number of insolvencies compared to other states”.
“NSW may have a higher proportion of insolvencies due to nationally focused businesses being headquartered there,” he said.
The data aligned with the credit agency’s Business Risk Index, which found five of the 10 most at-risk locations for business default in NSW.
“What this tells us, is that businesses need to keep on top of what the presiding risk factors are for businesses over the upcoming years,” he said. “Obviously, a range of industry specific and economic factors are at play, however, understanding risk by area is clearly a metric that can help businesses price risk more effectively,” Mr Coghlan said.
Aside from Victoria, which registered a slight decrease in insolvencies in 2021–22, other states all rose with Queensland up 22 per cent to 1,281, Western Australia up 5 per cent to 549, South Australia up 16 per cent to 227 and Tasmanian wind-ups almost tripling to 49.
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