Businesses going broke and dying have surged in this current financial year and the sector most likely to need a business undertaker, called an insolvency practitioner, is the same group of businesses that the Prime Minister bagged for overcharging — cafés and restaurants!

The failure of businesses has catapulted by 45% this financial year, with hospitality operations experiencing the greatest growth of liquidations, while construction remains the most serious sector for collapses. This shouldn’t be a badge of honour for a government going into an election on Saturday, but I suspect most of the country doesn’t link their material success to their employers and the wages they’re paid out of the success and longevity of the businesses that make it all possible.

Here are the numbers that don’t paint a pretty picture for the economy and the Government, which ultimately has to take responsibility for both success and failure of the country’s economic health:

1. The Australian Securities & Investments Commission (ASIC) revealed 11,162 insolvency appointments occurred from July 1 to April 6.
2. That’s a 44.1% increase from the 7,748 appointments for the same time last year.
3. Last year, 11,053 insolvencies was a record but that number has already been beaten and there are still three months to go!
4. There were 3,393 appointments in the March quarter, which was a 27.6% spike on what we saw in the same quarter last year.

The Daily Telegraph’s Matt Bell reported the following on the businesses under pressure: “Collapses in hospitality have surged 57 per cent to 1,845 so far this financial year. Construction remains the largest sector for insolvency appointments, although the growth rate has moderated to 24 per cent, compared with 34.1 percent between 2023-24. Retail trade insolvencies have risen 17.5 per cent.”

Industry experts who have to deal with these failing commercial operators identify the following reasons for this unsettling rise in businesses going broke.

1. Inflation’s impact on business expenses, such as energy bills.
2. Wage rises.
3. The accumulated debts of the Covid lockdown.
4. The ATO’s crackdown on overdue tax bills, many of which were partly created by the lockdown.
5. The work-from-home trend that disadvantaged businesses linked to office workers.
6. 13 interest rate rises that raised business costs and reduced the spending power of customers.
7. The fact that interest rate cuts have been delayed in Australia, compared to the US, Europe and the UK, because our inflation was persistently higher.

So, is the worst behind us?

Bell reports that KPMG turnaround and restructuring partner David Hardy said insolvencies were likely to continue climbing, despite the RBA entering a rate-cutting cycle.  “I don’t see them materially coming down any time soon,” he said. “Any real benefits from rate cuts might not flow through until the end of 2025. Even with some rate relief, other pressures like elections, tariffs, and a more active ATO will keep the insolvency environment challenging.”

Hardy rates the current business environment as one of the toughest he has seen!

“It’s challenging as a business when you’ve got demand pressures and the consumer doesn’t have the dollars to spend, and then also your cost base going up as well,” he told Matt Bell. “A lot of businesses are getting squeezed from both sides of the equation [and] it feels like we were sleepwalking into this — it’s been slow and steady, not sudden like the GFC.

“It’s taken a couple of years to build up to where we are now.”

I wonder how many voters on Saturday will be thinking about this when they cast their votes?