As we approach the end of a hot, humid and stormy February, we hope you have been able to refresh and revitalise with a break during the holiday season. Our articles cover a range of interesting topics for your enjoyment.
Traditionally, January is a quieter month due to the holidays and court closures. January 2024 was no different to this trend with Small Business Restructures dropping from over 100 in December 2023 to a little over 40 in January. Similar drops in appointments for court liquidations, Creditors Voluntary Liquidations and Voluntary Administrations, however, winding up applications bucked the trend with 300 for the month of which the ATO filed 80 winding up applications as opposed to 69 in December 2023. Total formal appoinments for January 2024 amounted to 614 which consisted of 90 Court Liquidations, 422 Voluntary Liquidations ( MVL and CVL ) and 102 Voluntary Administrations.
The Albanese Government changed course to amend the legislated Stage 3 Tax cuts which are scheduled to commence in July 2024. The amended tax cuts will result in a benefit to low income earners who have worn the brunt of higher costs of living due to inflation. For instance, a worker on $40,000 taxable income will receive a tax cut of $654 for the year but under the original plan would have received nothing. However, they would have benefited from the Stage 1 and 2 tax cuts. Individuals with a taxable income of over $100,000 would benefit from a tax cut of $2,179 which is $804 more than under the original plan.
High income earners with a taxable income of $200,000pa would have benefited under the original plan for Stage 3 with a tax cut of $9,075 which is expected to be slashed to $4,529.
These amendments are subject to the Labor Party gaining support from the independents and minor parties to legislate them in Parliament.
National Australia Bank released its result for the December quarter which showed cash earnings tumbling 17 per cent in December quarter to an amount of $1.8b.
The reason for the drop was cited as credit impairment charges as the bank faced higher loans in arrears. Cash earnings before impairment charges and tax were down 3 per cent when compared to the second half of the 2023 financial year.
Credit cycle tightening is likely to continue with stickier inflation and a government fiscal policy that conflicts with monetary tightening by the Reserve Bank. Economists have now revised predictions of an official interest drop to late 2024.
What a week we have had with resignations and new appointments to several of our largest companies. Virgin Australia's CEO, Jayne Hrdlicka resigned after doing four years of the heavy lifting and abandoning her initial plan to lead it to a public share offer on the ASX. No replacement has been found for the Company which was bought by Bain Capital from the Voluntary Administrators in 2020.
A sudden departure of Woolworths boss, Brad Banducci after he walked out of a Four Corners interview after questioning alleged price gouging and unfair dealings with farmers and suppliers. His replacement will be an internal candidate who leads the company's digital division, Amanda Bardwell. Woolworth's shares dropped 6.2% following the shock announcement.
Qantas, in an attempt to overhaul a battered reputation, has appointed John Mullen as the new chairman who currently chairs Brambles and Treasury Wine Estates. The current chairman, Richard Goyer will stand down in July 2024. Maybe we will see an improved wine selection on Qantas flights!
Whilst wages continue to rise and unemployment remains at near record lows, the productivity of the Australian economy continues to falter. New industrial laws have restored the union bargaining might of old and allowed the Maritime Services Union of Australia to continue its monopoly of the waterfront by imposing more costs on the economy.
Labor's energy policy enabled legislation of ambitious emissions which are likely to lead to further price increases and less reliable base load power. Price controls and other regulatory controls will likely lead to supply-side problems.
The out of control NDIS program and the Gonski school funding are areas where the government needs to haul in spending but Chalmers has not had any success on these fronts.
Chalmers continues to bank on high commodity prices, in contrast to its energy policy, to prop up the Australian economy together with Bracket creep in income tax. Heaven help us when the resource boom ends.
Every year, and this year no exception, Helm Advisory is thrilled to announce once again we will be holding an art event.
Location and art show details will be available soon. In the meantime, keep your diary free and save the date for Wednesday 15th May 2024.
Welcome to our first newsletter for 2024 filled with predictions for the year ahead and a profile of our new supervisor.
We take this opportunity to wish all our friends a Happy and Prosperous New Year for 2024.
With national house prices rising by more than 8 per cent last year despite constant increases in the cash rate, it is time to ponder on what will happen in 2024. The strong demand from migrants is expected to support further price increases albeit at a lower rate. The NSW State Government is attempting to ease the housing strain by introducing reforms to override council planning powers in low and medium-density areas.
Most economists are predicting a slowing in the growth rate to between 1 to 5 per cent citing borrowing capacity as the major constraint on buyers and a slowdown in house price growth in December 2023. However, a lack of housing supply across all Australian major cities will continue to provide support for a modest increase in housing prices.
Economists predict a fall in the official cash rate by the Reserve Bank of Australia by
September 2024 which may ignite house price growth in the final quarter of the calendar year.
Recently acquired o ces and development sites will continue to feel the costs of nance,
construction, maintenance and insurance which have all increased post-pandemic times.
Add to this the new regulation and legislation red tape and this property sector will be in for the hard grind with some owners being unable to survive leading to receivers being
appointed.
WHAT IS IN STORE FOR THE AUSTRALIAN ECONOMY IN 2024?
As burgeoning tax receipts fill the Australian Government’s coffers, the treasurer ti reluctant
to hand out relief to householders who are suffering from a cost of living crisis for fear that
any handout would be inflationary. The good news is that the increased tax receipts have
gone straight to the bottom line which has resulted in a slashing of the budget deficit to little over $1 billion this year. The Prime Minister is looking for ideas on easing the cost of living crisis and one such idea is to halve import taxes. This would have the added benefit of reducing prices and inflation which would keep consumers and the RBA happy.
The challenges for the Australian economy continue to below growth and high inflation.
The share market has had a slow start coming off almost record highs in December 2023 following a weak start on Wall Street. A healthy job market both here and abroad will delay any dedicions on reducing interest rates.
Retailers discounted heavily in the lead-up to Christmas and the Boxing Day sales with consumers purchasing online and at stores. It remains to be seen whether discounting is sustainable in the first half of the year. Consumption is falling on a per capita basis.
Macquarie Bank's chief economist, Ric Deverell has given the Australian economy a 50/50 chance of moving into a recession as population growth slows and the monetary cycle remains tight. Stage 3 tax cuts are coming into effect in the next six months which will add to inflationary pressures in 2024. According to treasury, wages are growing at their fastest pace in 15 years. Finally, unemployment is tipped to rise to 4.4 per cent by 2025.
INSOLVENCY PREDICTIONS FOR 2024
Small Business Restructuring will continue to gain popularity during 2024. High borrowing costs, a tight labour market, an aggressive tax office and reduced consumer spending will be some of the factors that will tip companies into insolvency.
Construction companies will continue to be one of the hardest hit in 2024 as increased costs of finance and building materials, government regulations and red tape continue to eat into profits. Supply chain impacts including the Panama Canal conflict will further affect the construction industry.
In the 2023 financial year, there were 7,942 insolvencies where companies entered into external administration or a controller was appointed. In the first half of the 2024 financial year, 4, 293 business have already collapsed and with the ATO ramping up its court action this quarter, 2024 may outperform 2023 for insolvencies. More than two-thirds of the ATO's collectible debt of $50b is owed by small business which will take advantage of the small business restructure regime.
Accomodation, food services including restaurants and cafes and retail services will be some of the worst hit by the fall in consumer spending.
INTRODUCING OUR NEW STAFF
Julian Lam is our newest staff member to join our Helm Advisory team as a Supervisor. Having worked with a variety of assignments since 2017, he enjoys the challenges and satisfaction that a career in insolvency brings. He brings with him expert case administration experience and staff management. When he is not working, he is somewhat of a foodie, liking to explore new varieties of food, Julian is alsoan avid movie buff and likes to catch up with the latest flicks.
