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ASIC statistics showing a sharp decline in the number of companies entering insolvency are not indicative of the true state of the economy, says RSM Bird Cameron.
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Insolvencies set to spike
19 June 2014
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March insolvency statistics for the 2013/2014 financial year show a fall of 21.1 per cent in companies entering formal insolvency appointments in the first quarter of 2014 compared to the last quarter of 2013.
Neil Cribb, national head turnaround and insolvency group at RSM Bird Cameron said the firm does not believe this decline is indicative of the state of the national economy, since outstanding tax debts continue to increase and cash remains tight across many sectors.
“Indeed, it is the antithesis of what we would expect,” he said.
RSM Bird Cameron expects insolvencies to increase as the year progresses and the ATO ramps up its effort to recover company tax debts.
Following the release of the federal Budget, government departments are finalising budgets and resources for 2014/2015, which Mr Cribb said will lead to the ATO ramping up tax debt recovery efforts and the likelihood of all forms of insolvency appointments increasing in the second half of 2014, particularly in the SME sector.
The Westpac/Melbourne Institute Leading Index fell sharply in May, pointing to a significant loss of momentum in economic growth and a strong indication that a genuine slowdown is underway, said the firm.
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"Considering what we are seeing across the economy and what needs to happen when it comes to controlling credit, RSM Bird Cameron doesn't see any official interest rate increases coming our way in the near term; and wouldn't be surprised if a further official interest rate cut hits the radar before Christmas," Mr Cribb concluded.
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