Economic recap
Businesses continue to be affected by overseas economic factors, from supply line shortages to rising costs. Rather than focus on factors covered in earlier articles we will look at what’s coming up in this month’s article.
Discussions without GRIP partners in Australia and the UK suggest that NZ may be 1 year away from seeing a notable shift in insolvency appointments. As a comparison we appear to be six months behind Australia who have seen the Inland Revenue ramp up collections and pressure and have begun to see insolvency workflow. Australia confirm they are roughly 6 months behind the UK who have seen themselves get a lot busier in recent months.
The NZ borders are set to fully open from 31 July 2022, this will be something the ski fields, tourist operators and Queenstown are looking forward to. How this will affect business is to be seen if the hoped-for inflow of tourists eventuates. At present net migration for the year is negligible as New Zealanders take long delayed OE’s and trips out of the country in our long winter months. The brain continues, putting further squeeze on businesses trying to find the right employees.
The 25 May 2022 OCR announcement saw the Official Cash Rate bumped up 50 basis points to battle inflation, it was made clear that the intention is to raise it further between now and this time next year to try rein in inflation. Most of this has already been priced into mortgage and lending rates, however.
On the other hand, recently released GDP figures for the March Quarter show a drop of 0.2. We will require a further drop in the June quarter to be in a “recession”. This will have a negative effect on business confidence. Why does it take so long to work out a quarter's GDP figures in this digital age? The stats were released on 16 June 2022, a full 77 days after the quarter had ended. Timely information is useful information.
The NZ media has a new focus on insolvency especially the construction appointments and writing a story around it. Leading to uncertainty in various sectors.
Looking at the Xero SME index graph, May 2022 comes back down 6 points after Aprils jump up. The other factors measured in the Xero SME insights show sales tracking down, time to be paid tracking up and wages tracking upwards. All these factors will be making business harder.
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
Solvent liquidations are beginning to return to normal levels in the month of May making up 34 of the 138 appointments. Court appointments however continue to remain low with only 25 appointments for the month, while shareholder-appointed insolvent liquidations make up 71 of the total appointments.
Comparatively with past year May’s this sets a new low, but this is typically the spot where appointments level off for the year and slowly decline into the Christmas months. As mentioned in numerous past articles on insolvency stats IRD still has a lot of work to do in taking enforcement steps against delinquent debtors, to emphasise the point only 7 of the 25 court appointments were the result of IRD applications to wind up in the month of May.
Notable Mentions:
The Tasting Shed Covid 19 and associated lockdowns brought an end to the TV chef Ganesh Raj’s West Auckland establishment. DDL Homes Ormiston Receivers were appointed, and the company entered Voluntary Administration by the developments financer when concerns were raised about the construction progress
Jonesy Construction Another casualty in the construction sector of increased cost of goods and locked in pricing. NZ Medical Association Budget and cashflow projection show that the financial situation was dire, and received an urgent liquidation recommendation from its board.
Insolvency by Industry
“Construction & Property Development” once again run away with the largest chunk of the pie. This is unsurprising for anyone with an eye one the media and constraints that have been affecting the sector in the last year and a half. “Accommodation & Food Services” help make up just under 60% between the two industry sectors, but this is to be expected given the continued closed borders and slowdown due to winter trading.
Winding Up Applications
May winding up numbers have managed to match 2021 levels. The difference in applicant creditors is quite noticeable, however. May 2021 saw IRD making up 77% of the applications while May 2022 sees IRD only making up 44% of the total applications. This remains the highest it has been as a percentage since October 2021 so shows IRD is beginning to pursue its extensive debtors list but still well below the level it should be at.
Notable Applications:
Property investment firm Propellor Property Investments and related entities have had winding up applications filed against them by IRD for unpaid taxes. The director has advised the applications have been dealt with and are strong arm tactics from IRD.
Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.
Personal insolvency figures remain below past years May levels. While the numbers have ticked up since April 2022 the lift saw a doubling in bankruptcy figures from 28 to 60 while No Asset Procedures were up 33% to 40 for the month. Debt repayment order figures dropped to single digits for the month.
Of note, court application bankruptcy proceedings have finally begun to catch up to debtor applications and were just under 50% of the total bankruptcy appointments. Previous months had seen court appointments making up only 1/3rd of the bankruptcies.
Notable Appointments:
Ex-All Black Rodney So'oialo and his wife Marilyn So'oialo (bankrupt) continue to be chased by debt collectors in relation to debts incurred in 2019 that remain unpaid. Debt collectors have had difficulty serving documents on Rodney So'oialo due to him working as a rugby coach in Sri Lanka and Malaysia.
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