Just as households grapple with how to make the family budget stretch for another month, firms are also wondering if they will be able to keep their heads above water from one quarter to the next, let alone from year to year.<\/p>\n
Many thousands are submerging; the number of companies entering into insolvencies has surged over the past two years to reach record levels.<\/p>\n
Innes Willox, the CEO of the Australian Industry Group, says that there are about 70% more insolvencies a year now than there were going into the pandemic period.<\/p>\n
Sign up for a weekly email featuring our best reads<\/a><\/p>\n Firms managed to survive through the Covid lockdowns thanks to extraordinary levels of taxpayer-funded support, alongside forbearance by the Australian Taxation Office when it came to enforcing tax debts.<\/p>\n As a result, the number of companies becoming insolvent plunged through 2019-20 and 2020-21 to average about 4,600 across the two years, according to Asic data.<\/p>\n Unsurprisingly, as support rolled off the number of business failures returned to pre-Covid levels of about 8,000 a year in 2022-23. But then they jumped past 11,000 in 2023-24 \u2013 the most in data stretching back to the turn of the century.<\/p>\n Analysts interpreted this surge as a form of \u201cpayback\u201d as the firms who may have failed earlier were it not for Covid support were now hitting the wall.<\/p>\n Except, as Willox notes, \u201cthe number of insolvencies didn\u2019t normalise as we would have expected\u201d.<\/p>\n Business failures climbed again to reach nearly 15,000 in 2024-25, or 40% above the last peak of about 10,800 in the early to mid-2010s. In the most recent financial year they were barely lower at 14,150.<\/p>\n \u201cWe are in phase two: businesses that have come out of Covid got through that first wave of insolvencies, and are now falling by the wayside,\u201d Willox says.<\/p>\n Helen Owens, the founder and owner of Brisbane\u2019s Tigerlamb hair salons, has experienced plenty of ups and downs in the 21 years since she started her business \u2013 not least the global financial crisis and then the \u201ctears and pain\u201d of Covid.<\/p>\n But right now feels different, Owens says.<\/p>\n \u201cPressure is coming from everywhere and all at once.\u201d<\/p>\n Owens feels like her four salons have navigated their way through the worst of the times, and is proud of that \u2013 even as she recognises many business owners are not in the same position.<\/p>\n \u201cI know everybody right now is treading water.\u201d<\/p>\n
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