Economic crisis and insolvencies

Insolvency statistics function as a rear‑view mirror on economic shocks.

The Global Financial Crisis (GFC) remains the clearest example. While the crisis itself peaked in 2008/2009, corporate and personal insolvency numbers continued to rise for several years afterwards as deferred failures ultimately surfaced. The insolvency curve lagged the economic event, reflecting the time it takes for financial stress to result in formal appointments.

In contrast, the COVID‑19 period produced a historically unusual outcome. Despite a sharp economic contraction, insolvency numbers fell to record lows. Government stimulus, creditor forbearance and extraordinary legislative interventions temporarily suppressed insolvency activity across the economy. Once those measures were withdrawn, insolvency numbers rose sharply, with post‑COVID data showing a clear reversion.

The charts below illustrate these cycles: the post‑GFC rise in insolvencies, the COVID‑era trough, and the subsequent rebound. Against that historical backdrop, what will the current crisis mean for the Australian business landscape?

Liquidation appointments [1]

The following chart plots the total number of provisional liquidations, court liquidations, and creditors’ voluntary liquidations against the 20-year average:

As readers will observe from the above, our 2 most recent crises have resulted in increases in insolvency numbers after the initial flash points. Post-GFC liquidations peaked in the 2012 & 2013 financial years and trended down until the 2025 financial year when they hit a historic high.

[1] Excluding members’ voluntary liquidations

Restructuring appointments

The numbers for voluntary administrations reveal a different trend. The following chart examines the total number of voluntary administrations and small business restructures, against the 20-year average. I note that SBRs are a “new” type of appointment, so there are no figures prior to the 2021 financial year. It’s generally accepted that SBRs have “eaten” into the voluntary administration market, as it provides a lower cost method for companies to compromise debt with creditors whilst the director/s remain in control day-to-day. 

Readers will observe that voluntary administrator appointments consistently decreased from the start of the 20-year period examined above until the 2022 financial year, when that downward trend reversed. SBRs gained traction in 2023 with material increases in the number of appointments in the two subsequent financial years. The popularity of the SBR regime has been driven by:

• A cheaper method of compromising debt with creditors than a voluntary administration and a Deed of Company Arrangement.

• The debtor in possession model, which means that director/s do not relinquish day to day control of the Company.

• The success rate: the ATO is the largest creditor in Australia. The ATO’s attitude towards SBRs has been a key factor in their adoption and growth.

• A method of resolving non-lockdown director penalty notices, which have increasingly been relied upon by the ATO as part of the debt collection toolkit.

Finance appointments

The following chart plots the total number of receiver, controller, managing control, and receiver manager appointments against the 20-year average. In general, these appointments are driven by secured creditors calling upon their security after a default.  

Unlike the liquidation figures, lenders were quicker to act during the GFC as 2009 FY to 2014 FY saw high numbers of lender appointments. 2025 FY was the first year where appointments exceeded the 20-year average since 2015.

The delayed effect of crisis

As depicted above, the effect of the GFC and COVID-19 on insolvencies were felt in the wake of the events for liquidations. Voluntary Administrations appear to have fallen out of favour between 2006 and 2022, despite the GFC, there was a historic trend downwards.

The increase in liquidations post-event is consistent with the pattern of behaviour we observe in companies:

• Companies defer paying tax in favour of other creditors that allow trading to continue to occur (landlord, staff, suppliers & services)

• Companies get behind on those tax obligations and then attempt to “trade out” of the hole.

• Many companies are unable to recover. By nature, taxes and financials are backwards-facing. Companies then seek to use a formal insolvency appointment to resolve the solvency issue.

Fuel as an economy‑wide cost multiplier

Fuel is an input cost that cascades through virtually every part of the economy. Rising fuel prices directly increase transport costs, but the broader impact is felt through second‑ and third‑order effects across entire supply chains.

The current situation is fluid (pun intended). At the time of writing, the price of diesel has increased from approximately $1.80/L in February 2026 to $3.09/L. The reduction in the fuel excise has limited impact on some businesses, depending on the level of fuel tax relief they were receiving.

Government response will shape the insolvency path

As history demonstrates, government intervention plays a decisive role in how insolvency numbers ultimately move. Policy settings around taxation, debt collection, assistance programs, and regulatory enforcement can either dampen or amplify insolvency outcomes.

However, there is a crucial distinction between the current environment and the COVID‑19 crisis. During COVID, governments-imposed restrictions on movement and trading that necessitated extreme countermeasures. Insolvent trading moratoria, statutory demand relief, temporary safe harbours, and widespread payment deferrals were politically and economically unavoidable responses to mandated shutdowns.

That dynamic does not exist in a fuel‑driven cost crisis. There are no restrictions on trade or movement. Businesses are not being prevented from operating; rather, they are being squeezed by higher input costs in an open economy. As a result, the extraordinary insolvency protections seen during COVID are unlikely to be repeated.

This distinction matters. Without legislative shields delaying creditor action or transferring risk to the public balance sheet, an economic downturn is more likely to result in creditors pursuing recovery through court winding-ups, ATO enforcement, secured creditor action, and director‑initiated appointments.

Reading the crystal ball

History suggests that insolvency numbers rarely react instantly to a crisis or shock. Rising fuel prices may not trigger an immediate insolvency spike but will increase input costs in multiple sectors simultaneously. If there is a general slowdown or contraction in economic growth (or a recession) it’s unlikely that we will see an immediate increase in insolvencies but likely see rising numbers in the years to come.

For advisers, lenders, and directors alike, insolvency forecasts should not focus solely on headline fuel prices. The more telling indicators will be margin erosion, tax arrears, elongated creditor days, and increasing reliance on short‑term liquidity.

Companies should also exercise caution before extending too much credit to customers. While they may tighten credit controls during a crisis, a customer is potentially more likely to go “under” after the crisis has passed.

Insolvency numbers:

Liquidations

Restructuring

Lender Appointments