Australia regulator flags surge in company insolvencies to 11-year high

1 month ago 19

Updated

Apr 18, 2024, 12:16 PM

Published

Apr 18, 2024, 12:00 PM

BENGALURU – Australia’s corporate regulator said on April 18 that it expected the number of companies falling into insolvency to reach an 11-year high, with the construction and hospitality industries the worst hit, according to its latest insolvency data.

In the nine months to March 31, 7,742 companies had entered administration, up 36.2 per cent from the previous corresponding period, the Australian Securities and Investments Commission (Asic) said.

The regulator said it expected that figure to exceed 10,000 by the end of the financial year to June 30, “a level not seen since the 2012–2013 financial year”.

The construction and hospitality industries had the highest number of company failures, accounting for nearly 27.7 per cent and 15.2 per cent of all insolvencies respectively.

Sluggish consumer demand and high operating costs have forced some companies to scale back operations, while a credit squeeze has made it harder and more expensive for companies to borrow.

“The most common cause was inadequate cash flow or blaming a ‘high cash rate’, simply meaning debts (outgoings) are higher than earnings,” Ms Jessica Amir, a market strategist with trading platform Moomoo, said in a client note.

Asic said that restructuring and court liquidation appointments increased more than threefold, compared with the previous corresponding nine-month period.

The Reserve Bank of Australia has flagged that 2024 is likely to be another tough year for businesses and households due to decades-high inflation and interest rates, fuelling few expectations of a rate relief during the year.

Australia’s central bank held interest rates at a 12-year high of 4.35 per cent in March for a third straight meeting. REUTERS

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