Retail insolvencies soar by 20 per cent as consumer sentiment barely recovers from record low
The number of Australian businesses going under in one sector has soared by 20 per cent in a sign of things to come with the global oil crisis.
Retail jobs are most at risk with the number of business failures soaring in the wake of higher fuel prices, new data shows, with consumer sentiment still near record low levels despite a temporary halving of petrol tax.
The number of shopfront businesses going into administration for the first time has climbed by 20 per cent in just a year.
In the nine months to March 22, 728 retail businesses were trading while insolvent compared with 607 during the first nine months of 2024-25, new Australian Securities and Investments Commission figures showed.
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“The customers they’re all trying to appeal to are under enormous pressures because of the cost of living, interest rates and increased cost of petrol,” he told The Nightly.
“Those that can’t move prices up because of pressures are in fact running into insolvency issues.”
Commercial rents are rising at rates above inflation, making it increasingly difficult to run a retail business as Chinese online giants like Shein and Temu offer much lower prices at time when consumers were cutting back on non-essential spending.
“That puts further pressure on the cost of business,” Mr Brookes said.
“That makes it difficult for bricks-and-mortar retailers who can’t suddenly close 10 stores because they’ve got long leases on those.”
The bad news with retail businesses has coincided with consumer sentiment barely recovering from last month hitting the worst level since records began in 1973 during the year of another global oil crisis.
The ANZ-Roy Morgan consumer sentiment reading for the week ending on April 5 showed a small bounce after petrol and diesel excise was temporarily cut to 26.3 cents a litre on April 1 for three months.
Motorists are now paying less than $2.30 a litre for unleaded, on average in capital cities, after previously paying more than $2.50 a litre in March, in the weeks after US strikes on Iran caused crude oil prices to soar to record-high levels above $US100 a barrel.
A 3.5-point improvement saw the consumer sentiment index rise to 62.3 points, up from 58.8 points in the week to March 29 which was the worst reading since records began in 1973 during the year of another global oil crisis.
The overall score is still well below the 100 level where optimists outnumber pessimists and significantly below the 108.9-point average since 1990.
Commonwealth Bank consumer data for the week to April 4 also shows a cutback in spending on travel, hospitality and home improvements, as petrol and utility bills consume more of the household budget.
“We are seeing early signs that households are shifting their composition of wallet spend due to higher petrol and electricity spend by lowering the share of wallet spend on eating and drinking out,” CBA’s report said.
Construction still had Australia’s highest number of insolvencies but the number going into administration fell slightly from 2552 to 2463, the ASIC data showed.
Hospitality businesses appear for now to be less affected by higher inflation and interest rates with the number going into administration falling by 14 per cent to 1513, down from 1763.
Of the 20 business categories, the number of insolvencies had risen in eight sectors, including retail, manufacturing, transport and warehousing, healthcare, mining, arts and recreational services, power and water and public administration.
Employers from July 1 will also be required to pay superannuation to staff on pay day, losing the three-month window, which WA Insolvency Solutions partner Jimmy Trpcevski said could see more of construction, hospitality, labour hire and healthcare businesses struggle with cash flow problems.
“For businesses already operating close to the line, this change could accelerate the path to insolvency,” he said.
“When a major expense shifts from quarterly to weekly or fortnightly, it permanently increases the level of cash a business needs on hand.”
