Restaurants, building firm insolvencies remain high
Insolvencies remain trending higher among the food and beverage sector, CreditorWatch says. (Dan Peled/AAP PHOTOS) Credit: AAP
The level of Australian businesses going under appears to be stabilising, but firms are still becoming insolvent at record-high numbers.
Restaurants and construction firms remain hardest hit in CreditorWatch's monthly Business Risk Index, which found more than 14,000 businesses went bust in the 2024-25 financial year.
But income tax cuts and government cost of living measures have helped the rate of insolvencies plateau, CreditorWatch said.
And with defaulted payments falling 6.5 per cent in June, there is some hope the overall health of businesses is on the up.
"It's a promising signal business cash flow pressures may be easing, but with insolvencies still running 33 per cent above 2024/25 levels, and particularly elevated in hospitality and construction, I'm not getting too excited just yet," CreditorWatch CEO Patrick Coghlan said.
"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."
Businesses were struggling to stay afloat in typically stable sectors such as health care and education, showing the breadth of the economic strain, Mr Coghlan said.
Hospitality businesses remain under the pump, with one in 10 closing in the year to June 2025.
While insolvencies have plateaued generally, they remain trending higher among the food and beverage sector.
Australian Restaurant and Cafe Association CEO Wes Lambert said it was no longer a case of if a hospitality business would close, but rather which one would shut it doors.
"It's a real threat for many businesses in the hospitality industry, especially those in CBDs with work-from-home now fully enshrined into employment culture, and with tourism remaining at levels not seen since 2016," he told AAP.
"Demand is low while wages, rents, utilities, insurance and other expenses are between 30 and 50 per cent higher than they were before COVID-19."
Mr Lambert said Australia needed to attract more tourists, and needed genuine discussion about the cost pressures on industries such as hospitality.
A quarter of all business that became insolvent in 2024/25 were in the construction sector.
But given the large overall number of construction businesses, less than one per cent of all of them became insolvent.
CreditorWatch labelled a rise in education and healthcare insolvencies "somewhat unusual" given both sectors are largely underpinned by government funding.
Education was hit by immigration and foreign student policies, they found.
The 14,716 business insolvencies recorded in 2024/25 was a massive 33 per cent jump year-on-year.
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