Bankruptcy numbers slide

THE number of bankruptcies in Australia dropped dramatically in the past financial year, defying interest rate rises and nervousness over the introduction of the GST.

The number of bankruptcies fell by 11.6 per cent in the 1999-2000 financial year, according to the latest official statistics.

Encouragingly, bankruptcies also fell by more than 17 per cent in the three months leading up to the introduction of the GST.

WA recorded positive falls, with a financial year fall of 11.2 per cent and a quarterly drop of 22.4 per cent.

Accounting body CPA Australia said the figures indicated a surprisingly robust economic climate, particularly for the small business sector.

Chairman of CPA Australia’s Insolvency and Reconstruction Centre of Excellence George Lopez said bankruptcies would normally be expected to increase in an environment where interest rates had risen.

“The fact we have had two consecutive quarters where bankruptcy levels have fallen is very encouraging,” Mr Lopez said.

“It indicates underlying strength in the national economy.

“The only danger is that there may be an impact in the next six months following the introduction of the GST.”

Mr Lopez said any GST impact on bankruptcies might not be seen until the second quarter of the financial year, as the first GST payments are not due until October 21.

In another encouraging sign, the number of people using debt agreements – a low cost alternative to bankruptcy – continued to increase.

Last financial year, the number of debt agreements entered into nationally rose from 507 to 806, an increase of nearly 59 per cent.

Debt agreements can be used in cases where the debt is less than $50,000.

The Federal Government recently announced that it would seek to make debt agreements more widely available.

This would be done by amending legislation to double the income threshold of eligible applicants to about $56,500 after tax.

Mr Lopez said, while the Federal Government move was to be applauded, banks were still showing a reluctance to embrace the debt agreement system.

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