Personal insolvencies are spiking in 2017
Rising insolvencies hint at growing cracks in Australia's economy.
2017 has been a financially stressful year for Australians.
According to the Australian Financial Security Authority (AFSA), personal insolvencies are up by 8% in the September 2017 quarter compared to the same quarter last year. This is the second distinct spike in 2017, with the March quarter showing an even higher 10.8% rise compared to the same time the year before.
The 2017 June quarter saw a drop of -3.5% compared to the same quarter last year, but that's compared to a concentrated 13.7% the year before.
Personal insolvencies Sep 2014-Sep 2017
The overall number of insolvencies was up 2.1% in 2016-2016 compared to 2015-2016, but 2017, in particular, has seen things speed up as more households reach breaking point.
It's not entirely unexpected. Australia has some of the highest levels of personal debt in the world, and even the "good debt" such as mortgages are becoming more toxic as rates keep rising faster than income growth keeps up. Energy bills have also shot up in 2017, while other factors such as transport costs and health expenses are also playing a part.
Where the cause could be identified, the report named economic conditions as the most common cause of business-related personal insolvency, and debt spirals as the most common non-business related cause.
Credit card debt might be a particular bugbear. Despite making up only 1.9% of average household debt, it's causing a disproportionate amount of stress and may be harder to pay back than other types of debt.
Australia's getting good at swimming in debt
The silver lining might be that Australians are getting pretty good at handling personal insolvency, and looking to a wider range of tools to avoid the consequences and black marks of bankruptcy. Insolvency is on the rise, but bankruptcies are trending downwards, and have fallen every year since 2009-2010, except for a mild 0.2% rise in 2015-2016.
In 2016-2107 compared to the year before, bankruptcies decreased by 5.1%, while debt agreements increased by 11.9% and personal insolvency agreements increased by 39.4%. These are often a favourable alternative for both debtors and creditors, letting debtors avoid complete bankruptcy and creditors get back more than they would otherwise.
This might come as little surprise. With insolvencies climbing and household debt increasing, there's also an increasingly wide range of tools for handling debt.
Balance transfer cards are a common way of working with seemingly intractable credit card debt, while some people are looking to refinance their home loans in the face of mortgage stress. Debt consolidation finance as a whole is probably making more of an appearance in insolvency agreements as well.
Australia might be swimming in debt, but it sure beats drowning.
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