Business insolvencies surged in February, in a sign that business conditions are returning to normal as COVID-related support measures are scaled back.
According to CreditorWatch’s latest Business Risk Review, ASIC data and its own proprietary information show a 61 per cent jump in external administrations in February, compared with the previous month.
CreditorWatch chief executive Patrick Coghlan said “the commercial climate is returning to more normal conditions.”
Temporary insolvency relief measures introduced in March last year as part of the government’s COVID response ended at the start of the year.
Following the end of the temporary measures:
• the minimum amount of debt that can trigger bankruptcy dropped down from $20,000 to $10,000 (before the COVID relief measures were put in place the minimum amount of debt that could trigger a bankruptcy was $5000);
• the minimum amount of debt that can trigger a statutory demand has come back from $20,000 to $2000;
• the amount of time an individual has to respond to a bankruptcy notice or a statutory demand has come back from six months to 21 days; and
• temporary debt protection, which provides relief from creditors, has come back from six month to 21 days.
There were mixed signals in the CreditorWatch data. The number of commercial debt-related court cases was down 56 per cent in February, compared with the same time last year.
And there was a 29 per cent increase in credit inquiries in February, compared with the previous month, which could indicate improving economic conditions.
“This increase indicates businesses are stocking up and buying the underlying materials required to make products and services to fuel economic growth,” Coghlan said.