The rise and fall of the building industry
Thousands of Australian companies collapsed in the last financial year marked by a string of high profile construction company insolvencies and with interest rates and inflation on the rise there are expectations of a wave of failures in 2022-23.
In the last 12 months the construction industry suffered a perfect storm of conditions, including supply chain disruptions, skilled labour shortages, skyrocketing costs of materials and logistics and extreme weather events.
Household names such as Probuild, Privium, BA Murphy, Condev, ABD Group, Waterford Homes and Pivotal Homes were just few of the building sector’s casualties in the last 12 months.
Across all sectors in Australia in 2021-22 there were 3917 liquidations or administration appointments. The biggest number of collapses was in NSW at 1536, followed by Victoria with 1022 and Queensland at 665. That was followed by 350 for Western Australia, 196 for South Australia, 91 for ACT, 29 in Tasmania and 28 in the Northern Territory.
Equifax head of product and rating services Brad Walters said creditor wind-ups have triggered the majority of insolvencies, and the construction sector has grown to represent 28 per cent of all Australia-wide insolvencies.
Taxpayer-funded stimulus and subsidies, and record low-interest rates, bolstered tradies going solo last year, with a near 18 per cent jump in new construction businesses, which over the past five years made up almost one in five companies and sole traders registered.
Despite abruptly ending almost 30 years of uninterrupted economic growth, the COVID-19 crisis did not materially affect the number of business entries and exits, according to the Australian Bureau of Statistics.
Initially introduced in late 2020, the program uses taxpayer money to pitch in 50 per cent of an apprentice’s wages up to $7000 a year; the three-month extension is expected to create a further 35,000 apprentice places.
Emily Ridley, who runs a small business consultancy in Moreton Bay north of Brisbane, said her clients were often tradies looking to set up a business to chase a higher hourly rate and various tax perks and concessions.
Small businesses can take advantage of the concessional 25 per cent tax rate and also use the temporary full expensing rules to deduct the full value of purchases such as vehicles in the financial year in which they’re purchased.