The Albanese government is addressing manufacturing insolvencies.
Examining the Allegation
Accusing the government of detrimental impacts on the manufacturing industry, the Coalition points to a surge in manufacturing insolvencies during the Albanese government’s tenure.
Deputy Opposition Leader Sussan Ley, in a piece published on January 16 in The Australian, attributes the decline in manufacturing to Prime Minister Anthony Albanese’s alleged lack of a solid economic strategy, ineffective industrial policies, and misplaced priorities.
Ley asserts that the current rate of manufacturing insolvencies is three times higher than it was just two years ago, indicating a concerning trend of decreased local production.
The question arises: Has the Labor government’s approach truly led to a tripling of manufacturing insolvencies in recent years?
RMIT ABC Fact Check delves into the matter to provide clarity.
Have manufacturing insolvencies increased due to the policies of the Albanese government?
The Final Decision
Ms Ley’s assertion does not paint the complete picture.
Recent insolvency data from the Australian Securities and Investment Commission (ASIC) reveal a significant surge in manufacturing insolvencies during the first half of 2023-24, with numbers tripling from 85 to 243 compared to the corresponding period in 2021-22.
Yet, the deputy opposition leader omitted any reference to the impact of the pandemic and certain policies of the Albanese government on these statistics.
According to experts consulted by Fact Check, a considerable portion of the recent spike can be attributed to the cessation of pandemic-related support measures that were aiding businesses in staying afloat.
These measures, such as JobKeeper payments and temporary insolvency safeguards introduced by the previous Coalition government, played a role in driving manufacturing insolvencies to a ten-year low in 2020-21 and 2021-22.
Subsequently, the Australian Taxation Office initiated a large-scale effort to recover outstanding taxes. Concurrently, interest rates have risen from their pandemic-induced lows, resulting in higher borrowing expenses for businesses.
Experts caution against interpreting the insolvency figures highlighted by Ms Ley in isolation, pointing out various other indicators that can be utilized to assess the industry’s well-being.
For instance, capital expenditure saw a 15% increase in the year leading up to September 2023. Additionally, at the commencement of the 2022-23 financial year, there were 90,720 operational manufacturing enterprises in Australia, up from 86,075 the previous year.
Manufacturing insolvencies have been on the rise in Australia for many years, according to ABC News reporter Caroline Winter.
Investigation into Manufacturing Insolvencies under the Albanese Government
Examining the Truth About Manufacturing Insolvencies
Manufacturing Insolvencies Tripled Under Albanese Government
In her analysis, Ms. Ley highlighted a significant increase in manufacturing insolvencies under the Albanese government. She stated that during the first half of the 2023-24 financial year, 243 manufacturing businesses had already faced insolvency. This number starkly contrasts with the figures from 2021, where only a few manufacturing businesses experienced insolvency during the same period.
A spokesperson from Ms. Ley’s office confirmed that the data supporting her claims originated from ASIC, the regulatory body overseeing corporate, markets, financial services, and consumer credit in the country.
Fact Check utilized ASIC’s data to verify the rise in manufacturing insolvencies, focusing on the instances where companies entered external administration or had a controller appointed for the first time.
Insights from Manufacturing Insolvencies under the Albanese Government
Impact of Manufacturing Insolvencies on the Albanese Government During the COVID-19 Pandemic
Impact of Pandemic-era Policies on Manufacturing Insolvencies in 2021-22
Manufacturing insolvencies during 2021-22 were significantly influenced by the policies implemented in response to the pandemic. Andreas Cebulla, an associate professor at the Australian Industrial Transformation Institute at Flinders University, emphasized the misleading nature of comparing insolvency rates between different periods without considering the unique circumstances brought about by the COVID-19 pandemic.
According to Dr. Cebulla, the regulatory landscape during the pandemic was tailored to reduce the likelihood of companies being declared insolvent. Measures such as raising the threshold for creditors to issue statutory pay demands played a crucial role in this scenario. Additionally, the availability of the JobKeeper allowance provided further support to businesses, enabling them to sustain their operations during challenging times.
These combined initiatives led to a notable decline in the number of businesses facing insolvency, with figures showing a significant decrease in administrations. The period between March and September 2020 saw the implementation of the Coronavirus Economic Response Package Omnibus Act 2020, which not only shielded company directors from personal liability but also introduced changes to statutory demand thresholds and response times.
Overall, the policies enacted during the pandemic, under the Albanese government, had a tangible impact on manufacturing insolvencies in 2021-22, highlighting the importance of considering the broader economic context when analyzing insolvency trends.
Fact Check: Electric Utes Manufacturing Insolvencies
**Impact of Government Measures on Insolvencies**
In response to the economic challenges brought about by the pandemic, the Australian government implemented temporary measures that were initially set to expire at the end of 2020. These measures, which were later extended, included amendments to the Corporations Regulations 2001 and Bankruptcy Regulations 1996. According to a September 2020 Treasury statement, these temporary measures resulted in a significant 46% decrease in the number of companies entering external administration from March to July 2020 compared to the same period the previous year.
As the temporary relief measures reached their expiration date, there were concerns about a potential surge in the number of companies facing external administration. Alan Duncan, the director of the Bankwest Curtin Economics Centre at Curtin University, highlighted that the withdrawal of stimulus measures was a contributing factor to the rise in insolvencies compared to previous years. This increase in insolvencies was not limited to the manufacturing sector alone, as stated by Duncan.
Effective January 1, 2021, the Corporations Amendment (Corporate Insolvency Reforms) Act 2020 introduced more permanent changes to insolvency laws in Australia. This act, considered the country’s most extensive corporate insolvency reform in three decades, aimed to provide small businesses, particularly those struggling due to the pandemic, with greater flexibility in either saving their businesses or winding them down efficiently. Then-treasurer Josh Frydenberg emphasized that these changes would enable businesses to enter the insolvency process sooner, thereby offering them more options for navigating financial challenges.
In conclusion, the Albanese government’s measures have had a notable impact on insolvencies across various sectors, with the manufacturing industry being just one of the affected areas. The evolving landscape of insolvency laws underscores the importance of adapting to changing economic circumstances and providing businesses with the necessary tools to navigate financial difficulties effectively.
Analyzing the Impact of Manufacturing Insolvencies on the Albanese Government
Zombies, Manufacturing Insolvencies, and the Albanese Government
### The Growth and Challenges of Manufacturing Jobs in Australia
Manufacturing jobs have seen a notable increase in recent years in Australia. However, this growth does not overshadow the significant challenges that the industry continues to face. According to Dr. Cebulla, insolvencies within the manufacturing sector can serve as crucial indicators of economic shifts. Nonetheless, they are just one of the many factors that reflect the industry’s overall health.
Dr. Cebulla highlighted that around 10% to 15% of manufacturing businesses enter or exit the industry annually, a percentage lower than the average across all sectors. As of the beginning of the 2022-23 fiscal year, Australia had 90,720 operational manufacturing businesses, showing a steady rise from the previous years.
Despite the positive trends, certain companies have faced insolvency, particularly those categorized as ‘Zombie firms’ surviving on loans and investor hype. It is essential to consider both sides of the ledger when analyzing the performance of manufacturing businesses.
Recent data from the Australian Bureau of Statistics (ABS) indicates a positive trajectory for the manufacturing industry. Manufacturing earnings, measured by EBITDA, experienced a substantial increase of $7.6 billion in 2021-22, following a previous rise of $2.8 billion in the preceding year. Moreover, manufacturing businesses witnessed a 5.1% turnover growth in November 2023 compared to the same period in the previous year.
The manufacturing sector also saw a significant boost in job creation, with a 9.2% increase in employment from May 2022 to November 2023 under the Albanese government. Despite these advancements, manufacturing’s share of the national output has declined over the years, contrasting with the growth observed in sectors like mining, finance, health, and education.
Professor Duncan acknowledged the challenges faced by manufacturing businesses, attributing them to global economic conditions such as energy prices, supply chain disruptions, cost of living pressures, and rising interest rates. While the industry has shown resilience and growth, it remains crucial to address the underlying issues to ensure its sustained development.
