ASIC - Drivers of rising insolvencies

Question

Senator NAMPIJINPA PRICE: What factors does ASIC consider have driven this increase? Ms O'Rourke: As part of the data collection that we do in relation to insolvency, we include an opportunity for people to share with us some of the drivers for the cause of insolvency. I do have some information on this. Forgive me; I think I'm going to have to take it on notice. But we do, because of the way we collect data, give people an opportunity when sharing the unfortunate information about their insolvency with us to identify cashflow issues and other things that might be, and I'd be very happy to share with you on notice what some of those drivers are. Forgive me for not being able to find it immediately. Senator NAMPIJINPA PRICE: If you could provide that on notice, that would be very helpful. In relation to my last question, I'd like to understand at what point a sustained period of around 15,000 insolvencies ceases to be a post-pandemic normalisation and become a structural concern. Ms Court: I think that does go to some of the drivers. You're right that in earlier years that COVID related driver was one of them and it has diminished over time, so some of the other aspects of either sectorally specific, geographically specific or business-specific issues that can generate the financial stress and loss can increase in predominance over something like COVID lag. Senator NAMPIJINPA PRICE: If I look at your data since 2022, since the Albanese government came to power, 50,000 insolvencies-around that-is a pretty significant number. As you pointed out, economically, that is of concern. The Reserve Bank has identified the withdrawal of pandemic support, rising costs, weak demand, higher interest rates and the resumption of ATO enforcement activity as contributors to the increase in insolvencies. Does ASIC agree with that assessment? Ms O'Rourke: I think they'd be better able to confirm their identification of drivers. Like I said, I'll take on notice what we can assess and see if it matches some of those drivers.

Answer

See attached response.

Documents

• Question with answer (PDF) (opens in a new tab)
• SQ26-000474 ASIC - Drivers of rising insolvencies.pdf (opens in a new tab)