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PIPA Annual Conference

Senator the Hon Amanda Stoker

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Good morning.

I am delighted to be able talk to you all today, particularly on a theme as important to the personal insolvency industry as our economic recovery from the Covid-19 pandemic.

I’d like to thank the Personal Insolvency Professionals Association for inviting me to give this presentation, as well everyone who has taken time out of their day to attend.

Economic challenges from the pandemic

Two years ago, when Covid-19 was emerging in Wuhan, few could have predicted the scale of the pandemic we have experienced.

It is what some economists call a ‘Black Swan’ event – a highly improbable, difficult to predict event with enormous economic impacts.

By March 2020, the scale of the challenge becoming clear. More than $8 trillion US dollars had been committed globally in economic support, and more than 100 countries had gone to the IMF seeking assistance.

In Australia, Federal Treasurer Josh Frydenberg described the challenge as the biggest economic shock Australia has faced since the Great Depression.

The first few months were particularly hard. Almost 860,000 people lost their jobs between March and May 2020. In the June quarter of 2020, GDP fell by 7 per cent and we recorded our first technical recession in 29 years. Unemployment reached 7.4 per cent in June 2020 – the highest in more than 20 year.

During this time consumer and business confidence fell to record lows.

Treasury considered it plausible that GDP could be 10 to 12 per cent lower than forecast in the June quarter. They estimated the unemployment rate could reach 15 per cent.

Reserve Bank Governor Philip Lowe warned of a looming insolvency cliff, telling the Standing Committee on Economics “there will be insolvencies. There will be bankruptcies. There will be some businesses that will not recover. That’s the harsh reality of an economic downturn that’s the worst in 100 years.”

However there were signs of recovery just a few months later.

In the September quarter, the Australia’s economy begun two consecutive quarters of above 3 per cent GDP growth. By March 2021 we had surpassed our pre-Covid levels of GDP and employment.

Government’s response to COVID-19

This rapid recovery didn’t happen by chance. It was the result the Morrison government’s strong and decisive action, including $291 billion in economic support measures.

The most well-known support measure – and perhaps the most significant – was the JobKeeper program.

In the first six months of the program, JobKeeper supported 4 million Australians and 1 million Australian businesses. It saved more than 700,000 jobs, ensuring people remained employed and businesses survived during the most difficult stages of the pandemic.

99 per cent of entities receiving JobKeeper in those first six months were small businesses or not for profit entities – groups that were particularly vulnerable to the impacts of public health measures such as lockdowns, capacity restrictions, and border closures.

But JobKeeper was far from the Government’s only economic support measure. Other measures included the Coronavirus Supplement, Cashflow Boost, and changes to bankruptcy rules.

As early as March 22, the Government temporarily adjusted the personal insolvency laws to strengthen the safety net for Australians. The bankruptcy threshold was increased from $5,000 to $20,000. Extensions were made to both the timeframes to respond to a bankruptcy notice and the temporary debt protection period – from 21 days to 6 months.

And in July, when the Government extended JobKeeper and the Coronavirus Supplement, the Attorney-General’s department worked with Treasury to ensure that the temporary bankruptcy measures were extended to December 31st.

For the personal insolvency system, the temporary bankruptcy changes ceased at the end of 2020. But the bankruptcy threshold was permanently increased from $5,000 to $10,000 at the start of 2021, reflecting the transition Australians had faced.

Impact of policies

It’s because of these measures that business collapses are down by more than 40 per cent compared to before the pandemic.

In the 12 months leading up to September 2021, there were 4,219 companies that entered external administration. This was down from the 7,552 companies that entered external administration between September 2018 and September 2019

At the same time, the number of actively trading businesses in the Australian economy grew by 3.8 per cent in 2020-21 compared with 2019-20. The number of businesses that exited the economy declined by 4.6 per cent over the same period.

And according to statistics from the Australian Financial Security Authority, personal insolvencies are tracking around a 30-year low.

In other words, the insolvency cliff predicted by Reserve Bank Governor Phillip Lowe has been avoided.

The massive rise in bankruptcies that people rightly feared has been suppressed by the decisive action taken by the Morrison Government.

Government’s programs such as JobKeeper, the Coronavirus Supplement, and the bankruptcy changes have saved hundreds of thousands of jobs, kept businesses alive, and prevented economic collapse. 

Australia’s economy has weathered the storm as well as any in the world and is now poised for record growth and job creation, with the Reserve Bk recently forecasting a post-lockdown consumer-led recovery in which the economy would grow 12 per cent by the end of 2023.

Insolvency sector rose to the challenge

At this point I’d like to take a moment to acknowledge the importance of the insolvency sector for its contribution during this crucial period in Australia’s history.

It is a feature of the insolvency profession that you must be ready when Australians suddenly find themselves in financial distress and businesses struggle or fail.

Insolvency practitioners play a vital task when economic failure occurs or looks imminent.

So it’s appropriate that as we come out of this crisis we recognise the importance of bankruptcy and insolvency administration.

There is a high standard of integrity and professionalism among those who work in the insolvency sector: trustees, administrators, lawyers, accountants, and financial counsellors – to name a few. The high standards of your profession contribute significantly to ensuring the personal insolvency system works fairly and efficiently for debtors and creditors alike.

Future of Personal Insolvency Reform

Earlier this year, the Government called for submissions on the bankruptcy system and the impacts of the Coronavirus, including the impact that it has on sole traders and partnerships.

These unusual times have allowed us to test new ideas and reflect on whether our policy settings get the balance right.

When it comes to our bankruptcy system, four areas of policy are front of mind:

  • The Default period of bankruptcy
  • debt agreements
  • personal insolvency agreements, and
  • offence provisions.

Our inquiry received over forty submissions. I want to thank everyone who was part of that process – and I’m sure some of you attending today were amongst those who provided feedback.

There were some very good points made in these submissions. They include the need to balance compassion with personal accountability; the importance of having a system that is fair for small business; and how allowing debt agreements with longer repayment periods can make them more viable for debtors and fair for creditors.

The government is considering Australia’s personal insolvency settings to make sure they best support our economic recovery from the impacts of COVID-19, including considering the default bankruptcy period and reforms to the debt agreement system.

The nature of the personal insolvency system is that it necessarily requires maintaining the balance between the interests of debtors and creditors.

The government’s focus will be on ensuring that the personal insolvency system strikes the right balance between the repayment of debt obligations and the need for our society to encourage entrepreneurship and allow people to have a fresh start.


Thanks to actions taken by the Morrison Government, we can look forward to a strong post-COVID recovery. Australia rose to the challenge we faced in the pandemic – not only by meeting the health challenges but by positioning our economy for future growth. The insolvency sector will play a vital part in shaping what that recovery looks like.

I’d like to thank you all for the contributions you have made. I hope this Conference provides an opportunity for you to reflect, learn and test your views about the personal insolvency system and how it can be improved in the years ahead.