In Australia is the economy as robust as some economists would have us think?

19/06/2013 by Michael Jones

Whilst interest rates in Australia are at historic lows and we remain in relatively good financial shape when compared to other Western Economies, what lies beneath needs to be understood.

During the calendar years 2010, 2011 and 2012 we have seen corporate insolvency levels across Australia increase on average at almost 4.5% per annum. Further, many SMEs are also reported continued periods of reduced or static profits.

Interestingly, household debt levels also remain at near historical highs, despite some media commentary to the contrary. Will this lead to an increase in personal insolvencies in  Australia? In Western Sydney, for example,  Bankruptcy and other forms of personal insolvency including Part IX arrangements are at a record.

Many family owned businesses are finding their bankers increasingly  difficult to  deal  with .Some  business  owners have reported that they  have  been asked  to  find  another bank despite having a long term and  successful relationship  with their  existing financial  institution. Is  this  really  the banks concern regarding the financial  health of these  businesses or simply an example of the banks focus on their own credit  rating?

It is clear that  some  industries are facing particular challenges in the current  environment .Accordingly at Jones Partners, we are commissioning a definitive report on the state of the Australian  Economy  from an insolvency perspective.The report will be the first of its kind and seek to set a new narrative amongst lenders and professional advisers and the business community generally in relation to insolvency trends and the economic outlook.

This report  will address;

  • Historical personal and corporate insolvency trends
  • Reasons  for major  company  liquidations, receiverships, and voluntary  administrations
  • Trends  in Bankruptcies and Personal Insolvency  Agreements
  • Industries  at risk

We  are delighted  to  be be associated with  IBISWorld, who will be looking at these issues and other issues surrounding various insolvency trends in Australia and overseas.This project will  be launched at an exciting presentation by  Phil Ruthven Chairman and founder of  Ibis World at  an exclusive event hosted  by  Jones Partners on the 3 July, 2013.The function  is  already fully  booked however a video  excerpt will be available via  download in  due course

Phil Ruthven says that the risks associated with company failures can be attributed as to ⅔  management issues relating to the company itself and only ⅓ to the industry.  Phil says that a bad company in a bad industry is sure to fail whilst a well-run company even in a tough industry has every chance of succeeding and possibly increasing market share.  The presentation will look specifically at what it takes for companies to be successful in tough times and look at those industries under particular threat having a regard to the current micro and macro-economic trends facing Australia.  there will also  be a  focus on the current uncertainties surrounding the political scene and the impact it is having on small and medium businesses.

I am looking forward to releasing the outcome of the project and I invite interested parties to contact me or make  comments below

In addition I have created a LinkedIn discussion group called “Business At Risk”   to encourage engagement in the project