By Matt Wade
Business failures in NSW jumped more than 40 per cent in the year to June and unemployment in Sydney is on the rise as higher interest rates sap the state’s economic momentum.
Sydney’s unemployment rate has climbed steadily during the past yearCredit: Louie Douvis
Small firms in NSW have been hit disproportionately hard after two years of cost-of-living pressures.
There were 4634 insolvencies in 2023-24, which was 41 per cent higher than the previous year and up by 140 per cent compared with 2021-22, figures released by the corporate watchdog ASIC show. The construction industry had the most business failures, followed by hospitality.
NSW firms made up 42 per cent of all insolvencies in Australia last financial year, even though the state’s share of the economy is only about one-third.
Small firms are currently at much greater risk of failure than larger ones, according to a commercial risk barometer prepared by credit bureau illion.
“Bigger businesses are coping much better than smaller businesses right now,” said Barrett Hasseldine, illion’s head of modelling.
Daniel Hunter, the chief executive of peak body Business NSW, said NSW is the only state where average yearly insolvencies have increased since 2018-19, the year before the onset of COVID-19.
“There is a greater risk for NSW employees because there is a higher proportion of employees working in the private sector compared to the other states,” he said. “We should be proud of the fact that we are the private enterprise state, which allows for innovation and expansion when economic conditions are favourable. It also creates serious pain when things are tough.”
A year ago, NSW’s unemployment rate reached a historic low of 3 per cent, but has since climbed steadily; last month the rate stood at 4 per cent.
Unemployment in Sydney reached 4.2 per cent in June (seasonally adjusted) the latest figures show, almost a full percentage point higher than the rest of NSW (3.3 per cent).
Even though employment in NSW has grown by a robust 149,000 during the past year, unemployment has also risen. There were 183,300 people looking for work in NSW last month – nearly 38,000 more than a year earlier.
Economist Justin Fabo, from analysis firm Antipodean Macro, said the increase in Sydney’s unemployment rate was consistent with the relative weakness in job advertising in the city.
“The number of job ads in Sydney is now clearly below 2019 levels, which is the weakest on that basis of all capital cities,” he said.
Job advertisements are a key indicator of future demand for workers.
Sydney’s highest unemployment rate in June was in the city’s South West statistical district, which takes in Liverpool and Fairfield, at 5.3 per cent on an annual average basis. The northern beaches and Sutherland had the lowest rates (both 2.4 per cent).
Analysis by CreditorWatch, a credit information bureau, shows small firms in western Sydney are especially vulnerable to collapse; six of Australia’s top 10 districts for rates of business failure during the past year were in Sydney’s western suburbs, the firm’s business risk index shows.
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