Business insolvencies stabilising after post-pandemic spike, says RBA

The Reserve Bank of Australia's latest Financial Stability Review indicates that total company insolvencies as a share of operating companies have stabilised over the past year, returning to their long-run averages.

The RBA report said that easing cash flow pressures and recovering domestic demand have supported company viability.

It noted that insolvencies saw a sharp increase in the years following the pandemic due to a catch-up effect from the exceptionally low number of insolvencies during the COVID-19 period, when temporary support measures were in place.

The report noted that while the rate of non-performing business loans has increased over the past three years, it remains well below the highs seen during the global financial crisis and has shown signs of improvement more recently.

The latest company insolvency statistics from ASIC indicate there were 9,618 insolvencies for the 2025–26 income year to 8 March. This was roughly in line with the same period for the 2024–25 year, when there were 9432 insolvencies between 1 July and 8 March 2025.

However, the report noted that company insolvency rates do remain elevated in some industries, including hospitality and construction.

"This reflects ongoing wage and input cost pressures, as well as thin margins for some construction companies," the central bank said.

"Consistent with this, information from the RBA’s liaison program suggests that the number of businesses seeking guidance from community organisations remains elevated in these industries."

Businesses, it said, were commonly seeking support for managing unpaid tax debt following recent ATO steps to resume enforcement actions on unpaid taxes.

"Consistent with this, the share of insolvent firms with large debts owing to the ATO has increased notably over the past three years," it said.

"Insolvency rates are somewhat elevated among retail, manufacturing and transport companies, reflecting cash flow constraints, and labour shortages remain a constraint for some transport firms."

The RBA report also warned that there was a risk that a sustained energy price shock could add to cost pressures, particularly in more energy-intensive industries such as transport.

"Personal insolvencies of business owners – many of whom are in the construction and hospitality industries – have also increased over the past few years, although from very low levels," it said.

This is also reflected in the ASIC insolvency statistics, which indicate that construction, accommodation, and goods and services were the industries with the highest number of insolvencies.

There have been 2,324 company insolvencies in the construction industry this year so far, and 1,432 insolvencies in the hospitality industry.