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Australia’s Top Insolvency List

Australia’s Top Insolvency List

 

Before we dive into the topic at hand, we feel it is crucial to first understand what exactly the term ‘insolvency’ means and its repercussions. In the simplest of definitions, insolvency refers to the state financial distress when a person, company, or entity fails to pay its debts when they’re due.

 

As a result, all assets of the entity are sold in order to return the owed amount. If you wish to learn more about the aftermath of insolvency agreements, head to the Australian Financial Security Authority (AFSA) or give us a call at 1300 887 210 to talk with an expert for free advice.

 

Before anything else, let’s dig into our insolvency list of Australia’s top insolvent regions:

BEST PERFORMERS Default % WORST PERFORMERS Default % CBD Default %
Mid-West 4.08% Rockingham 7.19% Adelaide City 5.0%
Wheat Belt (North) 4.23% Armadale &Mandurah 7.13% Perth City 5.2%
Albany 4.35% Gosnells 7.08% Sydney Inner City 5.8%
Goldfields 4.50% Wanneroo 7.07% Brisbane Inner City 6.1%
Cottesloe – Claremont 4.94% Joondalup 6.58% Melbourne City 6.2%

 

According to a Business Risk Index shared by Australia’s leading credit agencies, the western regions of the country will be most exposed to credit defaults over the following few months. Rockingham, Mandurah and Armadale will likely be the worst performers, with the probability of default of 7.19% (Rockingham) and 7.13% (Armadale &Mandurah).

Utilizing data from approximately 1.1 million Australian Securities and Investments Commission (ASIC) registered “credit-active” corporations across an array of industries, the CreditorWatch tool positions more than three-hundred Australian regions by qualified insolvency risk.

According to Patrick Coghlan, the CEO of CreditorWatch, this is the first time that future insolvency risk has been calculated this way. He shared that the BRI, which lists every region from best to worst on a scale of 0 to 100, extended a regional credit rating identical to the ratings it typically assigns to every Australian business.

He believed that insolvency list data is a crucial indicator of not only the regions’ performances and Australia’s overall economic health. In addition to this, it will also help businesses and entities to navigate through the rough and ambiguous economic conditions as the country strides out of the devastating pandemic.

If you have skimmed through the chart provided above, you’d see that the city of Perth CBD (5.2%) was far more stable than eastern seaboard cities and it was only second to the Adelaide CBD (5.0%) in terms of having the lowest chances of default in the entire country. On the other hand, the possibility of businesses landing in hot water was 5.8% in Sydney and 6.2% in Melbourne. This shows that big city centres like Melbourne, Sydney and even Brisbane have deteriorated significantly in contrast to Adelaide and Perth.

In addition to this, in the same report, James O’Donnell – MD of Open Analytics – revealed that commercial rent costs had a colossal impact on credit risk and were much higher in eastern seaboard cities. This means rent prices were much cheaper in the aforementioned city centres. Moreover, it is not just the city of Perth that’s safer for businesses – Western Australian regions on average had a lower likelihood of default (5.63%) in contrast to the Eastern regions (5.93%) and even the overall national average (5.78%).

Best Performers

The regions outperformed city centres and urban areas across the board, which is a symbolic and broader trend to emerge from the COVID-19 pandemic, majorly because many Australians left major cities to live in regional areas. As a result, agribusiness industry regions like WA’s Mid-West and Wheatbelt were among some of the best performers with the lowest probabilities of default.

Worst Performers

On the other end of the insolvency list, the worst performers or businesses that held the greatest risk of defaulting countrywide were:

  • Beverage and food services (5.9%),
  • Arts and recreation services (4.3%)
  • Finance and insurance services (4.1%)

The Gold Coast suburb of Coolangatta held the greatest percentage of businesses projected to go insolvent in the upcoming year (7.45%). On the other hand, the powerhouse mining industry unsurprisingly held the lowest risk of business collapse, followed by agriculture, forestry and fishing (3.0).

Long-Term Structural Risks

Many of you are already aware that longer-term structural risks have been coming out of the pandemic phase. They are likely to suggestively impact both the economy and the number of insolvency cases we will be witnessing over the coming years.

First and foremost, the “zombie phenomenon” occurs when businesses that are despairingly insolvent and fated to fail keep enduring due to a lack of pressure on their executives to start an official insolvency appointment. As a result, these firms lead to a long-term drag on the productivity and yield of the overall economy as they compete against healthy businesses, soak up employees and resources, and run up colossal debts while squandering assets that could have otherwise enabled returns to creditors.

In addition to this, there will be the risk that the government’s substantial stimulus would trickle over to inflation and will drive a rise in interest rates. Up till now, the bulk of this inflationary pressure has exhibited in asset prices, with housing exclusively witnessing momentous growth this year. However, the risk remains that the inflation genie spurts its lamp and disrupts the recovery.

Avoid Being Apart of This Insolvency List

If you think you are on the brink of insolvency or bankruptcy, we can help. The Bankruptcy Advisory Centre team has over 70+ years of experience offering bankruptcy advice in Australia and facilitating countless Australians to solve their financial concerns.

We’re a local Perth-based firm specialising in all facets of business and personal debt throughout Australia. We will help you to fully understand the best options that are available to you – without any judgements. We understand that debt and bankruptcy are extremely common financial issues. That’s why we are here. We will help you get the answers you have been looking for all along.

For more information, feel free to give us a call at 1300 887 210 or send us a message to talk with an expert for free consultation.

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