Your five-minute guide to this week’s hot issues

August 8, 2024
The Albanese Government had a lot riding on this week’s interest rate decision, but despite the relief of not wearing the blame of another hike, have now seemingly picked a fight with RBA Governor Michele Bullock anyway.

Elsewhere, the nation’s intelligence agencies have raised Australia’s terror alert and the PM has faced criticism over his indigenous affairs agenda.

This week, we’re bringing you a special report on the nation’s rising insolvency rates, a hot topic as the Australia’s policymakers attempt to deliver the much-promised ‘soft landing’ to avoid a recession.

Let’s start with a look at what made headlines this week:

1. Taylor Swift cancels three sold-out Austrian concerts after authorities uncovered an alleged terrorist attack.
2. Japanese stocks crash in biggest one-day drop since 1987 as global market rout intensifies.
3. U.S. Stock Market experiences biggest daily drop in nearly two years.
4. Australia has recorded its greatest Olympics ever winning 18 gold medals (so far).
5. Hezbollah aims to target senior Israeli official.
6. News Corp explores sale of FoxTel.
7. Former Qantas CEO set to lose $9.36 million from his final bonus payout.
8. South Australia Liberal leader David Speirs steps down from the top job.
9. Trump to debate Harris for the first time on 10 September.

Politics
 
ASIO lifts terror alert

ASIO’s director-general Mike Burgess joined with Prime Minister Albanese on Monday to explain that Australia’s official terror alert level has been raised from “possible” to “probable” as authorities believe the chances of a violent extremist act are now more likely.

Security agencies work on five levels – not expected, possible, probable, expected, certain.

The official terror alert level was last raised to “probable” in 2014 following the emergence of the Islamic State terrorist group. This increased terror threat level comes as tensions in Gaza continue to escalate and Australia’s own security environment has become more volatile and unpredictable.

Burgess said security agencies had disrupted eight incidents in the last four months that involved alleged terrorism or were investigated as potential acts of terrorism. Those cases included risks of knife attacks and involved radicalised young people, the youngest just 14.

The Prime Minister acknowledged that the raised level has been driven by increases in youth radicalisation, online radicalisation and the rise of “new mixed ideologies”. He highlighted the numerous protests outside electorate offices, saying that it’s not normal to have people spend months occupying the offices as part of a demonstration.

Opposition leader Peter Dutton also commented on the issue referencing the rise in anti-Semitism and suggesting the nationwide pro-Palestine protests have contributed to the rise in Australia’s terror threat level.

Burgess concluded his remarks by explaining that the threat level does not mean inevitable, and it does not mean it is intelligence about an imminent threat or danger. He wants Australians to be aware of the situation and remind us all to be vigilant.
 
Rates stay on hold but RBA blames government spending for sticky inflation
 
It was a nervous wait for this week’s rates decision for the Albanese Government after last week’s quarterly inflation data showed inflation had ticked upwards, albeit at a slower rate than had been expected.

Earlier this week, Japan’s Nikkei suffered the biggest one-day losses since 1987, with repercussions that saw billions wiped off global stock markets. It was in this context, with fears the world’s biggest economy – the United States – was heading for recession, that Michele Bullock and the RBA Board met to consider the case for a rate hike.

Leaving rates on hold at 4.35 per cent, Bullock said the Board was closely monitoring global events but that they weren’t concerned at this stage about impacts on the Australian economy. They are, however, increasingly concerned about high underlying inflation rates that have barely moved over the past year. Bullock confirmed in her press conference following the decision that government spending was having an impact on inflation, and that big-ticket cost of living programs were a factor in inflation remaining higher for longer.

The government took issue with this categorisation, and both the Treasurer and PM disputed the Governor’s claim this week, opening up a damaging split between the government and the independent central bank.

The RBA’s claim that government spending is making their job of reigning in inflation harder is extremely damaging for the government, which has spent months saying their budget strategy was helping to tackle inflation and rising cost of living challenges.

If the opposition can successfully leverage these claims, and convince Australians that the government has delayed much-needed rate relief, it will define the next election and put the PM on the back foot as he campaigns for a second term.
 
PM returns to Garma after last year’s Voice referenum defeat

A year ago, attending the annual Garma Festival in remote northeast Arnhem Land, the Prime Minister was in the later stages of campaigning for his signature policy – an Indigenous Voice to Parliament. 

Just months later, it would be overwhelmingly voted down by the Australian public, dashing hopes it would transform the lives of Indigenous Australians living in remote communities across the nation.

Having made the Voice and indigenous affairs the primary priority for his government, claiming on election night he would implement the Uluru Statement from the Heart “in full”, the PM faced sharp criticism after his weekend speech at Garma which many indigenous activists and advocates said was a broken election promise.

Despite allocating $5.8 million towards the establishment of a Makarrata Commission in the 2023-24 budget, a body to be focused on truth-telling and agreement-making with Indigenous Australians, the PM has walked back his commitment to Makarrata. He instead pledged on the weekend to deliver the first comprehensive economic policy for Indigenous Australians, and promised Labor’s Future Made in Australia agenda, focused on clean energy projects, will help improve economic outcomes for Indigenous communities.

Indigenous leaders have urged new Indigenous Affairs Minister, Malarndirri McCarthy, to hold firm on the government’s commitment to Makarrata. Expect the Coalition’s Indigenous Affairs spokesperson Jacinta Price to pursue the issue in Senate Question Time next week.

Insolvency insights

As the impact of 13 rate rises begins to filter through the Australian economy, governments at all levels are under pressure to demonstrate how their policies are easing the pain for Australian households and businesses.

The federal opposition frequently cite ‘record high’ levels of insolvencies as proof the Albanese Government is failing to deliver relief for struggling small businesses, but how accurate are these claims and what are the underlying causes of rising insolvencies in Australia?

We asked an expert to share some insights.


Not a week goes by when I don’t get asked about how busy I must have been in the last couple of years. This is of course a result of the constant media attention on the rising number of insolvency appointments, as the country continues its recovery from the COVID-19 pandemic and now faces a prolonged cost of living crisis.
 
For insolvency practitioners it’s certainly been an interesting couple of years. At the outbreak of the COVID-19 pandemic we all expected to be tied to the phone, but the Federal Government’s stimulus packages provided many businesses with a significant cash flow injection to see them through.
 
As the government support came to an end, there wasn’t a significant uptake in new insolvency appointments as businesses still had stimulus money in the bank, the Australian Taxation Office were giving generous repayment terms and there was a general willingness by creditors (including the big four banks) to be flexible and allow more time to repay debt.
 
In the past 18 months however we have seen the ATO – the largest driver of insolvencies in Australia – change its policies and increase its debt collection activities to try and recover over $50billion in collectable debt. At the same we are also seeing larger numbers of creditors applying to the Courts to chase their debts and in doing so, seek winding up orders against companies and sequestration (bankruptcy) orders against individuals.
 
These trends are reflected in the below data recently published by Alares, showing what could be described as a catch-up taking place from the low insolvency appointments seen during the outset of the COVID-19 pandemic. Leading to the next question of when will the catch-ups end, and the numbers of insolvency appointments start to return to pre-pandemic levels?



Certainly, I can say that the vast majority of new appointments coming across my desk are driven by the ATO and the pressure they are putting on businesses to pay their tax debt. This pressure is forcing many of those business to either enter into a formal arrangement with their creditors to try and compromise their debts, or close the doors and move on.
 
While none of us have a crystal ball, it appears that whilst the ATO continues to adopt their current debt collection policies, we may see increasing numbers of insolvency appointments for particularly small and medium sized businesses in the months and years to come.
 
As always for those concerned about the future viability of their business, seeking early consultation will likely result in more options being available and better outcomes for all stakeholders involved.
 
 
James Robba
Registered Liquidator
Registered Trustee
Principal, Worrells