Shock forecast from major financial authority as number of Australians going broke surges 5.3 per cent in 2024/25

The number of Australians unable to pay their debts lifted 5.3 per cent last financial year and is expected to grow another 22.4 per cent over a two-year period.

The latest figures from the Australian Financial Services Authority (ASFA) show 12,257 personal insolvencies in 2024/25.

A person becomes insolvent when they are unable to pay back their debts, meaning they typically either declare bankruptcy or enter a debt agreement.

Almost 80 per cent of those entering insolvency are renters, about 56 per cent were men and the largest group was in the age range of 30 to 34 years.

Those within labour-intensive or construction-related roles were disproportionately represented as tradies battle the impacts of the cost-of-living crisis.

AFSA’s chief executive Tim Beresford said the number of personal insolvencies would grow 9.2 per cent this financial year and by a total of 22.4 per cent by 2026/27.

“We’re anticipating (in) 2025/26 (the number of personal insolvencies) to grow to 13,500, and the following year to about 15,000,” Mr Beresford told Business Now.

He stressed the number of personal insolvencies sits well below previous times of economic strife.

There were about 37,000 personal insolvencies in 2009 when the Global Financial Crisis plagued the world.

“We are seeing an increase,” Mr Beresford said.

“But relative to what we’ve seen historically, these rises are relatively modest and in line with us heading back to the long-term mean.”

Renters were highly represented as they have limited financial buffers that would otherwise keep someone out of the personal insolvency system.

Just seven per cent of those who became insolvent had a mortgage and another one per cent owned their property outright.

Mr Beresford stressed the prevalence of those in their early 30s was because they had not begun building their wealth like older Australians.

“They’ve only just started their wealth journey. They’re obviously in their early 30s and have yet to build much in the way of assets,” he said.

“Therefore, once (they are) hit with some serious liabilities when they have no income, they find themselves in some financial difficulty, hence why we have a number of people aged 30-35 with limited financial buffers inside the personal insolvency system.”

New South Wales continues to account for the largest share of personal insolvencies out of any state or territory, with about 3,800 going insolvent.

Queensland followed with many of its 3,019 debtors working in labour-intensive and healthcare industries.

A larger number of those in the Sunshine State going insolvent were younger than elsewhere in Australia as the 25–29-year age group was the most represented.

Victoria came in third where just over 2500 of those in the state entered insolvency.