By Shamubeel Eaqub, Chief Economist, Simplicity Research Hub

Corporate insolvencies are a proxy of business stress. Looking at the chart below, you can see that they have have spiked to a new high.





Figure 1: Corporate Insolvencies in New Zealand


These numbers are not surprising, given the current recession is hitting some businesses very hard.

A recession has meant less spending and investment by households and businesses. Recent inflation shock meant that some businesses have not been able to pass through all their cost increases, which has further reduced their profits (selling less at smaller margins).

But many other businesses are soldiering on, and some are even thriving, and these figures need to be seen in context.

Corporate insolvency is an extreme measure, when other options have failed. This makes up a tiny proportion of business closures. In 2024 it was 0.9% of all business closures.

Even in normal economic times businesses close. In fact, a third fail within two years of starting, half within four years, and two thirds within eight years.

Some encouraging signs that businesses are becoming more resilient: recently started businesses are generally surviving longer than those that started a decade ago. Nevertheless, the recession is taking its toll.

Insolvency data shows still a lot of pain in the economy right now. There are some headwinds to navigate: a cautious recessionary mood, slowing net migration and fiscal austerity.

There will be more job losses and business closures. It will make the Christmas period harder for many - if you can help or spread a bit of cheer to your staff, suppliers or community, please do.

There is tentative good news. Some leading indicators (like cement poured) are stabilising. As the RBNZ cuts interest rates further, these leading indicators will translate to more concrete things that matter: more jobs and higher incomes, ideally leading to more New Zealanders being better off. 

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