Australia's corporate insolvencies have hit their highest level in at least 25 years
Corporate insolvencies have reached their highest level since ASIC began publishing the numbers just over twenty-five years ago.
The national number of corporate insolvencies showed fresh strength in March, reaching 1.1K in the month, which is the highest level since ASIC began compiling the statistics in 1999.
The same holds true for the seasonally adjusted number of insolvencies, which was also around 1.1K in March on CCI's analysis, and the estimated trend in insolvencies, put at about 1K on CCI's calculation.
The construction industry remains a key driver of rising insolvencies.
There is an unprecedented backlog of construction work at present, but builders that offered fixed-price contracts during the pandemic have been squeezed by high inflation.
For example, the cost of materials for building a home has increased by one-third from pre-COVID levels.
The RBA tracks financial stress closely, particularly for the household sector, but at the moment it is likely more focused on the risk that inflation may take longer to return to the 2½% midpoint of its target band.
This risk has been brought home by recent developments in global inflation, where the improvement in core inflation in countries such as the US, the UK and New Zealand, has either stalled or partly reversed over recent months, with the familiar theme of sticky services inflation.
In a similar vein, Australia's labour market has recently performed better than the RBA had forecast and bank staff will probably adjust their near-term outlook to reflect this when the Statement on Monetary Policy is released on 7 May, the same day as the next interest rate decision.
The labour market has gradually loosened over the past year or so, but demand is still running ahead of supply in that the unemployment rate and hours-based measure of spare capacity are both still below the RBA’s respective estimates of the NAIRU.
Moreover, the "loosening" process seems to have paused recently, with the unemployment rate remaining unchanged at a still-low level in Q1, some measures of monthly job vacancies stabilising, and total hours worked remaining unchanged in Q1 after falling from a record high over the second half of last year.
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