Personal insolvencies halved during Covid. Here are three reasons they'll probably stay low.
Changes in the attitudes of lenders — and borrowers — were already driving down insolvencies before the pandemic hit.
There are early indications bad debts are rising in the economy, which is hardly unexpected given the existence of higher interest rates and cost-of-living pressures coupled with a slowing economy.
But Australia’s personal insolvencies agency believes there will not be the scale of economic damage seen in previous cycles — and not just because of the growing likelihood of a 'soft landing'.
Rather, there has been a structural shift in how both lenders and borrowers react to stress, leading to a long-term shift in insolvency expectations. However, there’s also been a less welcome shift towards the use of buy now, pay later products by those under financial duress.
“We have seen a significant shift downwards in personal insolvencies, which is, on balance for society, a good thing,” Tim Beresford, the chief executive of the Australian Financial Security Authority (ASFA), told Capital Brief.
