Insolvency Data Shrouds True Business Closure Story - COSBOA
(23 June 2023 – Australia) Greater numbers of SMEs are opting to close as a result of falling profits as the cost-of-living crisis bites yet they are not being captured in official insolvency figures the Council of Small Business Organisations Australia (COSBOA) reports.
While the Australian Securities and Investments Commission (ASIC) data reveals almost 900 companies entered external administration or had a controller appointed for the first time last month, COSBOA CEO Luke Achterstraat believes the formal insolvency statistics do not reflect what is transpiring in the underlying economy.
Some small businesses might choose to temporarily close until the economy improved, or reduce their opening hours to lower their wages and energy bills.
“Businesses that have reduced their hours or chosen to close without going into official insolvency are not captured in figures used by economists and analysts to provide commentary on the economy” Mr Achterstraat said.
"The feedback we're hearing across Australia is it's this perfect storm of costs, costs and more costs, be it energy, rent, even insurance premiums are increasing as well. They're really fighting fires on all fronts, and the spectre of rising interest rates is only adding to that pain at the moment."
"So, in that sense, there's a bit of a hidden closure element amongst the economy at the moment and that's not being truly recorded in the insolvency figures."
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