Economic recap
We make our way through another winter month where we finally saw the NZ boarder fully re-open for the first time since 2020, this has helped our net migration, but levels remain lower that pre pandemic. We also saw our first cruise ship landed back in the Auckland CBD since 2020 making news stories across the country.
There remain a number of adverse factors affecting businesses starting with a weakening NZ dollar, staff shortages continuing, the seasonal downturn in industries during the winter months coupled with the sports related downturn resulting from the All Blacks continued losing and patch performances. Coupled with overseas influences of China’s covid policies affecting supply chains along with the ongoing war in Ukraine affecting commodity prices.
The Xero SME index saw a drop back by 6 points from June 22 highs that were still well above the index average. Businesses found that their days to be paid remained consistent at 23.5 days while sales fell 1.5%, the first decline in sales since Sept 2021.
Unsurprisingly the August 2022 OCR announcement saw the Reserve Bank lift the Official Cash Rate a further 50 basis points as indicated in their earlier announcements. The OCR lifts are expected to continue for the remainder of the year and into next year as they use what tools they have available to try and tackle rising inflation.
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
Company insolvencies saw a jump in July 2022 to levels not seen since pre pandemic, of the 172 total appointments court appointments made up 44 of these, a doubling in court appointments compared to June 2022. We also saw the solvent appointments double from June 2022 figures back to the levels seen earlier in the year.
Of note in the year-to-date receiverships have been very low but did see a jump in July to double digits. The year to date however is well below past years figures. 2021 saw total receiverships of 88 whereas up to June 2022 total receivership were only 18. Add to this the 13 in July 2022 (largely work taken by Australian based practitioners) brings to total to 31 but still well below 2021 and prior year levels.
Winding Up Applications
July saw the IRD put in some heavy lifting around their winding up applications. Having pulled back following the August 2021 lockdowns July 2022 was the first time IRD have reverted back to putting serious pressure on debtors with a tripling in their winding up applications. Other non IRD creditors kept their pressure consistent. It was only a matter of time for this to occur given the doubling in IRD debt levels since the beginning of 2020. They could not “be kind” indefinitely.
We expect to see his increased level of IRD activity into the early months of 2023 where it will likely drop off. The reason behind this is that 2023 will be an election year and the IRD typically pull back on their enforcement action in election years.
Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.
Personal insolvencies were one of the few insolvency stats that saw a slow decline in July, this is not unsurprising however as it is normally a month or two behind corporate insolvency figures. The breakdown between Bankruptcy, No Asset Procedures and Debt Repayment Orders was consistent with earlier months.
As we see corporate insolvencies rise, we will likely see a rise in personal insolvency rates as personal guarantees get called up and director/shareholders begin to feel the pressure.
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