Deloitte Access Economics’ Weekly Economic Briefing examines Australian company insolvencies, which jumped 23% year-on-year in June as companies grapple with high inflation, rising interest rates, shortages and a slowing global economy.
The good news, however, is that insolvencies are still tracking below pre-COVID levels; although that will likely change over the year ahead:
The average number of insolvencies being seen is actually considerably lower than pre-pandemic levels. The moratorium on insolvent trading (which suspended a director’s duty to prevent insolvent trading) coupled with considerable government support through various pandemic payments have in effect kept some ‘zombie firms’ alive over the past few years. Rising insolvencies in 2022 suggest some of these companies have now failed, but also highlight the challenges of the current financial environment.
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Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
