Total insolvencies across the retail sector have peaked at 1,152 in FY25, including first, subsequent or transitional appointments.
This is according to fresh data from the Australian Securities and Investments Commission (ASIC), which shows total insolvencies across all industries hitting elevated levels throughout the last financial year.
Retail’s surge past 1,000 insolvencies in FY25 (963 in FY24) is not as high as four other industries, with construction leading the way at 4,889 insolvencies, followed by accommodation and food services (3,256), other services (2,067) and professional, scientific and technical services (1,340).
When it comes to first-time appointments, retail insolvencies in FY25 hit 871, with the four industries mentioned in the prior paragraph still remaining ahead of 1,000. Construction was at 3,596, with professional, scientific and technical services at 1,010.
CreditorWatch CEO Patrick Coghlan said his firm’s June Business Risk Index data shows indications of an improvement in conditions for Australian businesses. However, the data also reinforces the view that while insolvencies may have peaked, the environment remains highly uncertain.
“The decline in CreditorWatch trade payment defaults is a promising signal that business cash flow pressures may be easing, but with insolvencies still running 33 per cent above FY24 levels, and particularly elevated in hospitality and construction, I’m not getting too excited just yet,” Coghlan said.
“The sharp rise in closures across sectors traditionally seen as more stable – like healthcare and education – underlines the breadth of the economic strain.
“We’ll continue to monitor for early signs of sustained recovery, but the next six months will be critical for determining whether insolvency rates begin to fall or remain stubbornly high.”
June insolvency data from ASIC remained elevated but has broadly moved sideways around 10 per cent below the November 2024 high in recent months. CreditorWatch attributes the broad plateauing in recent months to a combination of income tax cuts in mid-2024, cost-of-living support from governments, a stabilisation in the rate of new companies with tax defaults and more moderate rates of cost growth in recent months.
The firm also noted that the positive impact of the first interest rate cut by the Reserve Bank of Australia may now be starting to be felt, but added it’s too early for the May rate reduction to be impacting significantly, while a further widely expected rate cut in July did not occur, but is expected in August following higher than expected unemployment data for June.
According to the Australian Bureau of Statistics (ABS), the seasonally adjusted unemployment rate rose to 4.3 per cent in June, driven by a 34,000 increase in the number of unemployed people.
Looking ahead, CreditorWatch chief economist Ivan Colhoun claims several significant challenges remain for businesses as the new financial year begins. Previous significant cost increases have not reversed, even if the rate of inflation and cost increases going forward have slowed.
Other challenges include economic growth globally and in Australia amid US President Donald Trump’s tariffs and trade policy, with the US economy becoming likely to experience slower growth as a result of the higher tariff settings. Colhoun said this is never helpful for global growth, given the US economy is such a large part of the world economy.
Other longer-term forces including AI and technology, the ageing of populations, rising inequality, climate change and geopolitics contribute to a challenging outlook for firms, but Colhoun noted each trend also provides opportunity for business growth for some.