According to the Telegraph on September 11, the Australia Financial Security Agency (AFSA) recently warned that personal bankruptcy cases are expected to surge this fiscal year as households consume savings to pay off debt, coupled with the possibility of rising unemployment, leading to economic stagnation.
In the face of this trend, AFSA CEO Tim Beresford highlighted the pressures faced by families and their potential consequences in the current economic environment.
Over the past few years, the rental market's constrained supply and population boom have left many unsecured tenants facing upward pressure on rents, often outpacing inflation. Although this group of people only accounts for about one-fifth of the total population, it accounts for more than ninety percent of Australia's personal bankruptcies.
AFSA predicts that Australia will face about 14,850 personal insolvencies in the coming year, up 25% from 11,600 last year.
"Households are depleting their savings to cope with the current economic environment, and while overall savings levels are still high, at the micro level, those who save less are already in a very vulnerable state, almost struggling to break even," Mr Beresford explained. ”
It is reported that employment has become a key factor in supporting the survival of these families. "If the unemployment rate rises from the current 4% to 5%, the number of bankruptcies will far exceed our expectations and could quickly exceed 14,800," Beresford noted. ”
It is important to note that the increase in the personal bankruptcy rate occurred on a lower basis. During the pandemic, Australia's personal insolvencies rate fell to less than 10,000 cases a year, compared to an average of 23,000 cases over the past decade. With the post-pandemic economic recovery and the gradual withdrawal of relief measures, the insolvencies rate has rebounded again.
About a quarter of all personal insolvencies are directly related to business insolvencies, in part because the Australian Taxation Office is aggressively pursuing up to $50 billion in tax owed. This has not only led to an increase in the number of small business restructuring applications, but has also triggered more Notice of Penalty (DPNs) against company directors.
In stark contrast to renters, homeowners, especially those with full ownership, are rarely bankrupt. This seems to tell us that property ownership provides a layer of armor for people to be financially secure to a certain extent.
According to statistics, the average amount of debt of personal bankrupts in Australia is relatively low, about 50,000 Australian dollars, which is much lower than the national average debt of 260,000 Australian dollars. "The majority of insolvencies in our record are tenants with relatively low levels of debt, which is modest in the broader Australian context," Mr Beresford said. ”
To help people cope with the current economic woes, Beresford is calling on Australians to seek professional financial advice and caution against misleading bad advisers.
"Whether or not you actually end up going bankrupt, getting solid advice will lead to better outcomes." "At the same time, we are committed to cracking down on bad consultants who abuse their role or position in society to exploit vulnerable groups." ”
Beresford also mentioned that the AFSA is adjusting its approach to gambling problems away from simply punishable behaviour to recognising that gambling addiction is a hazard.
"A lot of people who go bankrupt because of gambling don't do it intentionally, they are controlled by gambling," he said. "AFSA plans to publish a revised version of its practice guidance on offences in the second quarter of this financial year, which aims to provide a more humane and effective solution to problem gambling.