Business Financial Distress Nears COVID Levels As Sole Trader Numbers Rise

Authored by Rex Widerstrom via The Epoch Times (emphasis ours),

The volume of businesses struggling to pay their debts in Australia is on track to exceed the heights set during the COVID-19 pandemic, according to two reports on the nation’s economic health.

Up to 13 percent of working-age Australians and 47 percent of secondary school students want to work for themselves or start a business, but that’s not translating into a pipeline of new enterprises, according to the Committee for the Economic Development of Australia (CEDA).

“Our analysis shows the proportion of business owners in the workforce has declined steadily over the past two decades and fell to a record low last year. The decline has been sharpest for owner-managers with employees and less steep for solo owner-operators. It is evident across all age groups, including younger workers,” said CEDA Chief Executive Melinda Cilento.

While the total rate of business formation has grown moderately over the past decade, it has been almost entirely driven by growth in sole traders.

In contrast, entry rates for businesses that employ staff declined steadily through the 2000s and has since been relatively flat.

This trend has coincided with the rise in second jobs, “side hustles,” and digital-platform work.

“Starting a side hustle or taking on gig work can be a flexible way to get started and gain some hands-on experience,” Cilento said. ”But the evidence suggests most of these activities are intended only to top-up household income, and not to build the next generation of employing firms.

“If we want a more productive, competitive, and resilient economy, we need to make it easier for people to turn a good idea into a growing enterprise.”

To help achieve that, CEDA wants the federal government to use next month’s federal Budget to introduce further cuts to “red tape” and to review existing business support programmes.

This entails eliminating redundant or out-of-date regulatory obstacles, streamlining the application process for grants and other support programmes, and expanding access to financing and insurance.

The government should also promote business advice and training more effectively, and remove anti-competitive obstacles that hinder the entry and expansion of new businesses, CEDA says.

Auditors Sound Warning

Meanwhile, 2025 was a record year for “going concern” notices for businesses unable to pay their debts with in the next 12 months, according to Chartered Accountants.

The group was concerned about the viability of 28 percent of Australian-listed companies outside the mining sector, up from 20 percent in 2021.

That compares to 15 percent in New Zealand and approximately 8 percent in comparable high‑income countries internationally.

Among Australian miners, the figure increased to nearly half, up from 32 percent in 2021.

“This level of uncertainty exceeds that seen at the height of the COVID disruptions and reflects the cumulative impact of global trade uncertainty, market volatility, higher interest rates, and persistent inflationary pressures on business viability,” said Chartered Accountants Australia and New Zealand (CA ANZ).

Its report, “Insights into 2025 auditor reports: A focus on going concern,” was conducted in partnership with the Universities of Melbourne and Queensland, and took place before the current Middle East conflict and its resulting energy price shock.

“Auditors are now flagging greater uncertainty than during the pandemic itself, which shows how sustained economic pressures around liquidity, refinancing, and future profitability can be just as challenging for businesses as an acute shock,” said Amir Ghandar.

While mining is under particular pressure, the conditions are also affecting other capital-intensive industries such as information technology and health care.