The Australian Financial Security Authority (AFSA) released the September quarter of 2020 personal insolvency statistics late October. The numbers tell the same story, the number of Australians entering into personal insolvency arrangements is continuing to drop across the board.
Every state and territory in Australia has recorded a decrease. Nationally, personal insolvencies have decreased by 50.9% when compared to September 2019 quarter.
While personal bankruptcies have been on the decrease since 2019 September quarter, they are now at their lowest level since current records began in the September quarter of 1986.
The decrease is also being experienced in corporate insolvency appointments. Corporate insolvencies are down 50.3% when compared to the 2019 September quarter.
What are the numbers showing?
While the numbers are low, it isn’t a reflection on the performance of companies, the financial wellbeing of individuals or the economy as a whole. Ordinarily, low insolvency numbers would mean low unemployment levels, low debt to income ratio, wage growth, and high economic growth. The low numbers are a result of the Government measures and relief packages introduced earlier in the year. That is to say the Jobkeeper payments, moratoriums on creditors to collect their debts, and protection for directors from potential insolvent trading claims.
Another contributor to the low personal insolvency numbers is due to the increase in informal hardship applications. Creditors and lenders are providing various support and hardship options for their customers who are unable to make the repayments and enter into a suitable payment arrangement.
Without the Government measures and relief packages, or informal arrangements by creditors, it is expected the personal and corporate insolvency appointments would be trending upwards.
Where are we heading?
While the support policies remain in effect, some to 31 December 2020, it is expected personal insolvency numbers will remain at this low level. When the formal and informal support measures expire or are wound back, it is expected that the bankruptcy numbers will start to increase. How steep this uptick will be is uncertain; however, the numbers will likely begin to return to their pre-COVID levels.
Nonetheless, the message is clear: if a person is in financial distress now, or expects to be in the future, they should talk to a trusted professional regarding their options. They can contact the National Debt Helpline on 1800 007 007.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.
Sources: -
https://www.afsa.gov.au/about-us/newsroom/bankruptcies-fall-546-september-quarter-2020
https://asic.gov.au/regulatory-resources/find-a-document/statistics/insolvency-statistics/
