Financial Hardship Going Up
The June quarter 2016 report from the Australian Financial Security Authority showed that the level of personal insolvencies has risen for the first time since the peak of the global financial crisis in 2008. These figures indicate that more Australian households are having trouble making repayment on their loans and debts which has led to an increase of last-resort financial measures being taken. This in turn has resulted in the rise of bankruptcy and insolvency rates, with a 13.7% jump in the three months to June 2016, as opposed to the same period in 2015 where the increase was only 7%.
Personal Insolvency Is A Category Which Groups The Following:
- Bankruptcies
- Debt agreements
- Personal insolvency agreements
According to the AFSA report, bankruptcies and debt agreements have increased, with the exception of personal insolvency agreements which was stable.
These insolvency rates have been scrutinised by the media since the release of the report mid-July. This is because the current economic status is that interest rates are low and unemployment is relatively stable. So it begs the question - where is it going wrong for all these families and households, and why are insolvencies on the rise?
Western Australia and Queensland – Heavily Impacted
The mining turndown has had a negative impact for those living in Western Australia and Queensland. In fact, almost 20% of the total personal insolvencies in Australia comes from Western Australian households! Bankrupt people from WA and Queensland were the main contributors to the first rise in insolvency rates in 5 years.
Analysts have identified this as the flow-on effect from the mining downturn since November 2013. With the decrease of iron ore prices, projects have been shut down and companies have looked towards massive cost-saving schemes, meaning thousands of jobs have been axed and compromised. Mine workers’ wages were a huge factor - the lifestyle adjustment is enormous due to the debts that their income can no longer afford to cover.
To Give An Insight On The Current State Of Mining Companies;
- In February 2011, iron ore prices were valued at $US187 a tonne
- In July 2016, iron ore prices are valued at $US55 a tonne
Business Related Personal Insolvency
The June quarter report also showed that 17.5% of debtors entered a business related personal insolvency, which was a rise from 16.1% in the March quarter of the same year (2016). Economic conditions was cited as a common business related cause, with unemployment or loss of income , and excessive use of credit as the most common non-business related causes.
Be Proactive in These Hard Times
DebtFix is here to help families going through tough times. We can provide expert confidential advice for your household, or walk you through plans that can help you become debt free in the future. If you’re worried about situations where you’ve bit more than you can chew – our team can help you find a solution through this process. Contact DebtFix on 1300 332 834 today!