Australia’s elevated business failure rates are sharpening focus on supplier resilience, with insolvency experts warning that further small supplier collapses could create knock-on effects throughout the nation’s supply chains.
Insolvency growth has stabilised after reaching record levels, but the operating environment remains difficult, particularly for small businesses facing high borrowing costs, rising operating expenses and increased Australian Taxation Office debt-recovery activity.
Speaking to The Nightly, KPMG Australia’s partner in charge of turnaround and restructuring, David Hardy, said there was little reason to believe the pressure had passed.
“There is a real prospect that insolvencies continue to kick up,” he said.
“My simple observation is that small business is the heartland of the economy and at some point it will work its way through and impact the big end of town; at some point there will be knock-on consequences for other parts of the economy and the larger corporates.”
Hardy said many businesses had exhausted the buffers they built up during and immediately after the COVID-19 pandemic, with a combination of higher interest rates, weaker consumer demand and more aggressive tax debt collection leaving little room to absorb further shocks.
While insolvency numbers have shown signs of stabilising, Hardy warned that this doesn’t necessarily signal a sustained recovery, and that further deterioration in trading conditions or additional economic shocks could see a prompt reversal.
“The reality is there’s still a lot of pressure in the system,” he said.
Hardy’s comments come as Australian Securities and Investments Commission (ASIC) data revealed 12,819 companies entered external administration during the first 11 months of the 2025-26 financial year.
Although that represents a 4.6 percent decline on the same period a year earlier, insolvency appointments remain significantly above long-term averages.
Construction is the hardest hit sector, accounting for almost one in four appointments, followed by accommodation and food services, retail trade and professional, scientific and technical services.
Court-appointed administrations rose 11 percent to 3,094 in the year to 21 June, while creditors’ voluntary liquidations increased three percent to 6,163, highlighting the continued financial stress many businesses face.
ASIC has also noted that while the number of insolvencies remains historically high, the rate of company failures relative to the growing number of registered businesses is still below the peaks of more than a decade ago.
Some economists expect lower interest rates to bring gradual relief over the coming year, but many insolvency experts maintain that small businesses remain financially fragile after several years of elevated costs.
For procurement teams, this begs the question: What can you do now to support the small suppliers your own operations depend on?
