SME insolvency expected to rise
Financial institutions expect high levels of insolvencies in the small to medium sized business sector in Australia in the next 12 months, according to a Norton Rose Group global survey.
Around 80 per cent of Australian respondents and 75 per cent globally believe it will be another 18 months or more before liquidity returns to pre-crisis levels.
Latest insolvency statistics released by the Australian Securities and Investments Commission indicate there have been 870 insolvencies around the country in August, significantly lower than the all year high of 914 in May, but higher than June and July figures.
Liquidity being perceived as the greatest risk to business prospects represents a stark change in sentiment from six months earlier, when more than 50 per cent of Norton Rose Group survey participants indicated they were seeing a return to liquidity.
The survey also found that a vast majority of respondents also expected market consolidation and super fund mergers in the next 12 months.
The survey revealed a great deal of optimism was shown about investment opportunities in Australia. Outside of Asia, Australia was noted as the best prospect for business, according to the survey.
Norton Rose Group partner and head of financial institutions in Australia, Dan Marjanovic, said the key challenge for the Australian Government and regulators in the post-global financial crisis period was how to manage the delicate balance between scaling back the stimulus package without adversely affecting the economy.
“From the strength evidenced in the recently released economic growth figures, the Australian authorities appear to have facilitated an environment in which a switch from reliance on Government spending to private sector demand appears to be taking place fairly smoothly,” Marjanovic stated.
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