Business closures are rising again in Australia, as owners approaching a 'fiscal cliff' call it quits

Businesses in Australia are beginning to close again as government support winds back. (May James, SOPA Images, LightRocket via Getty Images)
  • Australian business defaults jumped 23% and administrations by 11% in September, according to the latest CreditorWatch data.
  • “Some businesses which have been reliant on government support are starting to accept the reality of their situation,” CEO Patrick Coghlan said.
  • The rising number of business closures comes at the same time that JobKeeper and JobSeeker began to be wound back.
  • Visit Business Insider Australia’s homepage for more stories.

A growing number of Australian businesses are pulling down the shutters for the last time, as they contemplate a future without government support.

Defaults rose sharply in September, having not risen one bit since May, jumping 23% as businesses struggle to pay their debts.

Meanwhile, others are simply deciding the risks are too high. The number entering voluntary administration rose by 11% over the same month, according to the latest data from CreditorWatch.

“September’s increase in default and administration rates does indicate that some businesses which have been reliant on government support are starting to accept the reality of their situation and are taking steps to settle with their creditors,” CEO Patrick Coghlan said.

While the three eastern states all saw administrations decline in August, Queensland and Victoria both saw closures jump by around 24% each last month.

The rise comes at the same time that JobKeeper began to be wound back. For those businesses that rely on it, the reduction means they’re potentially out of pocket between $300 and $750 per employee per fortnight.

The falling rate of JobSeeker at the same time will see government stimulus taper off towards what economists call a ‘fiscal cliff’.

Throw into the mix, $200 billion-plus of business and mortgage deferrals, and there are plenty of reasons for small and medium businesses to take stock.

While Coghlan said closures were “never something you want to celebrate”, he acknowledged that it was better that devastated businesses shut now on their own terms rather than delay the inevitable.

“What we don’t want to see is businesses that are doomed to fail continuing to operate and taking healthy companies down with them,” he said, echoing long-held concerns that the government’s changes to insolvency laws could hurt Australia’s recovery.

“The long term trend is that zombie companies will continue to survive on government support and so the next six months are crucial in determining what position we start our economic recovery from.”

Meanwhile, the time it is taking businesses to pay their bills remains more than three times pre-pandemic levels. While those have come off their highs a little bit in recent weeks, it’s a major concern.

“For a signal of how Australian businesses are faring, payment times provide a glaring picture of how tough the environment is, especially when juxtaposed against 2019,” economist Harley Dale said, noting payment times in the transport, warehousing, and postal sector had blown out to three months.

“As government support is rescinded, which way this metric tracks will be crucial in determining how well Australian firms fare in our new economic world.”

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