The Australian Financial Review recently reported that “total construction sector inflation will hit 9.5 per cent over the year to June 2022, and 6 per cent over the year to December 2022”.
This increased financial pressure in the industry will heavily impact the likelihood of increased insolvency activity.
With the latest ABS statistics confirming that the CPI increased by 2.1% in the last quarter, and that inflation reached 5.1% over the 12 months to March 2022 quarter (the highest since 2001) - those in the building and construction industries have been particularly hard hit.
Higher inflation impacts:
- Supply chains: a shortage of materials has seen an increase of 3.8% in construction costs;
- Labour markets; and
- RBA interest rate rise: higher interest rates may lead to a dampening in economic activity.
These additional costs have flow on effects to construction activity, some of which may be far reaching.
Historic low levels of interest rates have enabled borrowers to borrow more, which has impacted on record high housing prices and inflation. The Reserve Bank has raised the official RBA cash rate 25 basis points from 0.1% to 0.35%.
There is severe pressure on supply chains, energy markets, increased global inflation and debt – not to mention a war taking place in Europe and a new Federal Government. These factors, amongst many others, have worked together to create a degree of recent economic uncertainty.
Holman Webb expects to see a wave of increased insolvency activity over the coming months. This presents businesses with increased risk, and credit managers with challenges. Prudent businesses and credit managers will take early steps to mitigate that risk and implement strategies to deal with that risk head-on.
Holman Webb’s Commercial Recovery and Insolvency Group has decades of experience in the credit industry, and understands the importance of implementing suitable terms and conditions of trade and supply.
Partner Christopher Hadley and Special Counsel Andrew Tanna are on standby for businesses requiring assistance with reviewing, drafting or updating credit agreements and terms and conditions - and to commence litigation.
If you have any questions regarding the content of this article, please don’t hesitate to get in touch today.
We are pleased to invite you to join Holman Webb's Commercial Recovery and Insolvency Group for our upcoming webinar: 'Tips to improve commercial recoveries and increase cashflow', taking place from 11:30am (AEST) on Thursday 4 August.
Presented by Holman Webb Commercial Recovery and Insolvency Partner Christopher Hadley, and Collections Software Specialist Griffin Swanson, this interactive seminar will cover best practices for collections leaders.
Topics covered will include:
- What are the impacts of the risk you take on?
- What’s the worst that can happen?
- Why does this matter?
- Could increased ATO activity bring about more insolvency?
- Why does this impact on trade creditors?
- What are we expecting to see in the coming year?
- What can you do now, to mitigate this risk?
- What is the simplest, and most effective way to protect your credit risk?
- Important terms and conditions
This seminar will be highly relevant for CEOs, CFOs, Credit Managers and Collections Specialists.
Date: Thursday 4 August 2022
Time: 11.30 – 12.30pm AEST
CPD Accreditation: Attendees will be eligible to receive 1 CPD point
Lunch is on us!
- All webinar registrants will go into a draw to win one of ten $30 Uber Eats vouchers!
- Winners will be selected at random at 9.00am on Thursday 4 August.
- Winners will receive their Uber Eats voucher code by 10:30am on Thursday 4 August.
For more information:
Bill Montgomery (Business Development & Marketing Manager)
E: events@holmanwebb.com.au
T: +61 2 9390 8457