Economic recap
Inflation has remained constant in the final quarter of 2022 at 7.2 the same as at the end of the third quarter in 2022, it is still down from the 7.3 high point seen during 2022. While economists and the Reserve Bank were hoping for a drop this factor will be weighing on the Reserve Banks mind in its ongoing fight against getting inflation back to its 1%- 3% target band. While other developed countries across the world begin to see inflation coming under control we are not yet there in New Zealand.
Coupled with the elevated inflation we have business confidence at all-time lows as seen in surveys run at the end of 2022 and through January 2023, signalling that businesses do not have high hopes for the coming year, and we are likely to see businesses struggle throughout 2023. We have seen unemployment figures rise 0.2% with the latest quarters data being released, however staffing pressures in certain industries remain. Coupled with the extended fuel levy relief through till June 23 that will likely continue to provide some relief to the cost of living crisis.
The next Official Cash Rate review is on 22 Feb 2023 where we will likely see a rise of up to 75 basis points with a number of commentators now predicting a 50 basis point rise. With up to 50% of mortgage holders coming off lower fixed rates in the next 6 months the affect of these OCR lifts continue to be felt by consumers as interest rates double and in some cases triple.
While January is normally a slow news month the change of PM has given the media something to report on along with its increase in personal and corporate insolvency reporting that has also seen an uplift over the Christmas break, particularly if the business operated in the construction sector. In an election year these failing businesses and cost of living crises will likely play a part in election promises by the various parties and how they will mitigate the fallout to the wider economy.
Company Insolvencies – Liquidations, Receiverships, and Voluntary Administrations
December’s figures while not as high as November, were typical for the month with less work days in the month due to the Christmas break, the levels seen however were above both the 2020 and 2021 December figures. January on the other hand has started the month with appointments in line with earlier years with no court appointments for the month and professional advisors on leave appointment figures remain low. How the recent floods across the north island remains to be seen with businesses losing substantial stock to water damage and some areas (Coromandel) blocked off to visitors due to slips tourism will likely be affected.
From a yearly point of view total appointment figures for 2022 exceeded the 2020 and 2021 appointments. While there was a slight increase in voluntary administrations in 2022 and a reduction in receiverships the bulk of the new appointments came through shareholder insolvent appointments. Court appointments for the year remained in line with prior year ratios.
Winding Up Applications
December winding up figures saw the traditional seasonal drop. January however exceeded the prior 2 years winding up applications.
December’s corporate applications have remained similar to prior year’s figures, it is the IRD applications that have picked up and continued to rise in January. While IRD has a backlog of derelict debtors how far their recovery collections will continues into 2023 as an election year is yet to be seen.
Personal Insolvencies – Bankruptcy, No Asset Procedure and Debt Repayment Orders.
Corporate appointments continue to follow prior years patterns with a slight lift, this has not been reflected in personal insolvency appointments. The numbers track down in the December month, lower than all prior Decembers with no lift in sight. The graph below shows the downwards slope over time and the continued reduction in bankruptcy figures and the increased portion No Asset Procedures have continued to make up of total personal appointments.
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