Defaults rising as recession hits hard
Australia’s business bankruptcies have jumped for the first time since June.
Australia’s business bankruptcies have jumped for the first time since June, with new data showing a 23 per cent increase in defaults in September, and Victoria and Queensland worst hit.
Monthly data from the CreditorWatch Business Risk Review found the number of businesses entering administration also rose, by 11 per cent in the month, despite continued efforts from the federal government to stave off insolvency administrators.
The recent increase in defaults and insolvencies suggested that some “zombie businesses” that were only able to continue trading thanks to the changes were now making the choice to shut up shop, the CreditorWatch report said.
However, the increase in defaults and insolvencies as recorded by CreditorWatch, based on Australian Securities & Investments Commission data, showed a patchy and uneven rate of failure across the country.
Queensland recorded the largest jump in businesses entering administration, up 24.1 per cent in September, following a fall of 25.4 per cent the month before.
Victoria saw a 23.8 per cent increase, after a drop of 49.3 per cent in August.
Meanwhile, NSW business administrations continued to decline, down 1.6 per cent in September, following a 34.3 per cent fall in August.
CreditorWatch chief executive Patrick Coghlan said it was undesirable to see businesses that were “doomed to fail” continue trading and take “healthy companies down with them”.
“Seeing businesses enter into administration is never something you want to celebrate. However, September’s increase in default and administration rates does indicate that some businesses which have been reliant on government support are starting to accept the reality of their situation,” he said.
The report points to slight improvements on cash flows for businesses, a key indicator of the health of the economy.
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