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Liquidations up, again – August statistics released

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This month’s release of ASIC insolvency statistics reveals that the number of corporate insolvencies in August 2011 is the second highest month on record. Director initiated insolvencies (mostly Creditors Voluntary Liquidations) make up a large portion (59%) of all appointments.

The key statistics are:

  • The number of companies entering some form of insolvency administration in the month of August 2011 was 1,049. That figure is the highest August on record and the second highest monthly figure ever, the highest being 1,095 in March 2009. The August 2011 number is a 20% increase over the previous August of 870.
  • This continues the trend of record insolvency numbers this calendar year with February, April, June, July and now August 2011 being the highest for each of those months.
  • Directors are by far the most common initiator of insolvencies, accounting for 59% of all insolvencies in the year to August 2011. Director initiated insolvencies include Creditors Voluntary Liquidations and Voluntary Administrations. Creditors initiated 27% of insolvency appointments and Banks 14%.
  • Geographically, the bad news continues in Tasmania and WA this calendar year. Tasmania insolvencies have doubled when compared to the average of the same period over the previous 5 years and WA insolvencies are up 71%.

What we are seeing this year is the highest number of corporate insolvencies since records have been kept, which is since 1999.  Our further research shows that, since the GFC, the cost of insolvencies to Australian Banks, as measured by bank bad debts, also remains very high.  In the financial year ended June 2011 total new bad debts were over $22 billion.  Pre-GFC the figure was commonly $4 billion

The state-by-state analysis is also revealing.  Tasmania and WA have experienced a huge jump in insolvencies in 2011.  Victoria, South Australia and Queensland have had a material increase whilst New South Wales has been relatively stable.  Somewhat surprisingly, Queensland insolvency numbers are up only 24%, which is not good, but not as bad as expected.  Anecdotally business conditions are poor in Queensland and we expect the number of insolvencies in Queensland to further increase over the remainder of the year as the effects of the floods are felt.

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