Since May 2022 the Reserve Bank has been preoccupied with bringing down inflation, with 13 rate rises the weapon of choice. However, with inflation on the slide, the question is: it time for the central bank and the Albanese Government to start rescuing businesses going down the gurgler?
This chart in the Daily Telegraph shows insolvencies are on the rise — the highest in six years. But that’s not all.

The Australian’s Geoff Chambers has penned a piece today reporting that “Almost 1,650 manufacturing and construction businesses have plunged into insolvency in just six months, with thousands of jobs under threat as companies move offshore and shut operations in response to rising power prices, supply chain pressures, labour shortages and high inflation”.
But it’s not just these businesses that are typically challenged when rates are aggressively hiked because Chambers revealed ASIC and the ABS stats show the problem is widening.
“Spikes in business failures were also registered across the accommodation and food services, retail, transport, postal and warehousing, healthcare and social assistance, and professional, scientific and technical services sectors,” he revealed.
All this isn’t good news for the PM’s $15 billion National Reconstruction Fund, which replaced Scott Morrison’s dumped Modern Manufacturing Initiative, over concerns that companies couldn’t apply for funding via the website of the funding vehicle.
The NRF wanted to encourage investment “…in seven priority areas including renewables and lower emissions technologies, medical science, transport, defence capabilities and technologies, and value-adds in resources, agriculture and fisheries,” Chambers says.
The Government is blaming the Coalition for axing support for the car industry and manufacturing generally but the Deputy Opposition leader, Susan Ley, isn’t having any of this.
She told The Australian that the NRF is “yet to release a single dollar to an Australian firm, while insolvencies are skyrocketing”.
Coalition analysis of announcements by manufacturing companies since mid-2022 estimates that more than 3,000 jobs have been lost or are under threat. “Labor promised they would ‘rebuild Australian manufacturing’ but instead they are delivering an industrial graveyard, a graveyard which is now littered with once great Australian businesses,” Ms Ley said.
Of course, this is the ‘blame game’ politicians play but the growing seriousness of the problem is bound to show up in rising unemployment and slower economic growth, so the story of these business collapses has to be a big consideration for the Reserve Bank when it decides about interest rates on 6 February.
Hopefully, the 31 January reading on the December quarter inflation will support the view that prices are on the way down. If we see another rate rise, these insolvencies figures will get substantially worse.
Meanwhile the Daily Telegraph reports that 2024 early signs aren’t great for businesses. “Insolvency and business turnaround specialists Jirsch Sutherland partner Andrew Spring said 2024 has started stronger than normal.
“Usually, January is a quiet month due to the holiday season and court closures, but we’ve rolled into 2024 with insolvency inquiries and appointments coming thick and fast,” he said. “We have many active appointments and strong demand for our services – and we’re likely to see a lot more, as creditors’ attitudes are likely to begin to change.”
The Telegraph reports that “…statistics compiled by Alares for the first half of the 2024 financial year there were 5,497 insolvencies, well over pre-covid levels.”
Monetary or interest rate policy operates with a lag and the bite is beginning to hurt. I’m hoping the RBA doesn’t choose to ignore these early worrying signs or we could end up in a recession. I’m also hoping Treasurer Jim Chalmers is looking for a few rabbits to pull out of his hat on Budget night in May, or else next year’s election could see him with a new job on the Opposition’s side of Parliament.