“Insolvencies are now 75% higher than pre-pandemic conditions as a slow economy and surging costs send more companies to the wall, indicating a structural shift in business conditions and confidence,” said Mr Innes Willox, Chief Executive of the national employer association Australian Industry Group.
“There were 3,450 insolvencies in the June quarter and 14,150 in the previous financial year, compared to around 2000 a quarter in the years before the pandemic. Construction is the worst hit sector – a particularly bad sign for our national ambition to build more homes.
“During the pandemic, the number of insolvencies fell dramatically – partly due to JobKeeper, and partly due to allowances made during the difficult trading environment.
“In the years following the pandemic, insolvencies increased as the economy reshaped and business owners made hard decisions about their future. Unfortunately, the number of insolvencies has continued to steadily rise, and since 2024 has settled at a rate 75% higher than pre-pandemic. This is far in excess of the opening of new businesses in that time.
“In the last decade, the number of businesses in Australia has increased by 26%, but the number of insolvencies has increased by 76%. Insolvencies have therefore been growing three times faster than the number of businesses in Australia.
“Structurally elevated insolvencies reflect the overall weakness in economic conditions. Since 2024 Australia has experienced its longest period of low growth since the 1990s and the longest period of high inflation since the early 1980s – both imposing significant stress on balance sheets.
“While construction is the largest source of insolvencies, reflecting the sector’s struggle with high costs, accommodation & food and retail are also under pressure because of lower consumer spending. Professional and administrative services have seen the worst blow-outs, with insolvencies up 10-fold, reflecting reduced overall business activity.
“Surprisingly, the care industry has also been a driver of increased insolvencies. Historically this has not been a feature of the care sector, but has increased six-fold since the pandemic, with a tightly regulated sector having limited ability to pass on higher wage and operating costs.
“Business forms the backbone of existing and new jobs and services for Australians. This data indicates the pressure that large parts of the economy are under and reinforces the need to remove unnecessary roadblocks, ease cost pressures and enable the conditions for improved business and consumer confidence,” Mr Willox said.
