AFSA Chief Executive speech at the 2025 Australian Credit Forum

Introduction

I wish to acknowledge the traditional custodians of the land on which we meet, the Gadigal people of the Eora Nation, and pay my respect to elders past and present.

Thank you for the opportunity to speak to you today and for the work you do with the Australian Credit Forum to ensure strong credit standards and knowledge across the profession.

As senior credit managers, you also have a key role in the collective stewardship of the system and I’ll speak more on that later.

Today I want to touch on what we’re seeing in the personal insolvency space, the structural shifts occurring in Australia’s credit system and how we’re responding.

I’m keen to take any questions you have at the end of my presentation. 

Personal insolvency trends

This slide gives you an overview of personal insolvency trends over the past 50 years. 

As you can see, insolvencies rose steadily for almost 40 years from 1972 to a peak of 37,000 in 2009–10 after the GFC.

They’ve mostly been falling since then.

But the biggest drop has occurred in the past 8 years, thanks to 3 key drivers.

First of all, your behaviour as credit managers changed in the wake of the Hayne Royal Commission in 2017.

The Royal Commission was a wake-up call for the finance industry to change the way it engaged with customers.

And you have heeded that call.

Creditors are now much more likely to work with debtors when they experience financial difficulty – to seek solutions, to reach a workable compromise. 

Next, debtor behaviour changed in the wake of the pandemic. People in financial difficulty are now much more likely to raise these issues with their creditors.

So, we now have much clearer – and more proactive – lines of communication between debtors and creditors. 

And, finally, unemployment is lower. Ten years ago, unemployment was between 5% and 6% – but for the last 3 years, it’s had a 3 or a 4 in front of it. 

As a result of these drivers, personal insolvencies have fallen to levels we haven’t seen since the late 1980s. 

But there are some modest headwinds. 

While we’re seeing promising economic improvement, geopolitical tensions mean there’s a lot of uncertainty and volatility in the world.

Just a few weeks ago, the IMF downgraded economic growth forecasts for the world – and Australia – by half a percentage point in the wake of recent tariff disputes.

Other factors, like the ATO resuming debt collection activities it relaxed during COVID, also impact our system. 

The tax office is our biggest creditor, accounting for around 15% of system liabilities.

Because of these headwinds, we expect insolvencies to rise modestly this financial year, from 11,600 to 12,400.

This is still well down on the 10-year average of 21,000.

Insights into the personal insolvency system

I want to share 4 key insights we’re seeing.

1. The first key shift in the Australian economy is a substantial contraction of the unsecured credit market, as large creditors make commercial decisions to reduce their unsecured exposure.

In 2008, personal credit – of which approximately 80% is unsecured – was 14% of GDP. Now it’s around 6%.

Now, instead of taking out a personal loan to buy a second car, people are turning to secured credit – using their redraw facility or offset account. It’s a smart choice, a lower cost of finance.

This has allowed product innovation in the unsecured credit market, and new players to enter the market.

Buy now, pay later has become more prominent in the credit system, with reports that over 30% of people are using it to cover essentials like groceries and fuel.

In the personal insolvency system, approximately 2% of new debtors entering personal insolvency a decade ago had a BNPL debt. Last year, it was 49%.

It still makes up a small portion of the credit system, at 1%, because the amount of credit is usually in the hundreds of dollars.

But its contribution more than doubled in a year, from around $50 million in 2022-23 to about $100 million in 2023-24. 

Other products gaining traction include payday loans and cryptocurrency. 

This all adds up to higher risk coming into the system, in 2 ways – through products with higher risk profiles and operators without a social licence to operate.

It poses increased risk to vulnerable debtors, such as the ones we see at AFSA.

2. The second key insight I want to share with you is that personal insolvency system is not representative of the broader economy.

People entering our system often don’t have an established asset base to fall back on when times get tough. They don’t own a home or have a mortgage. 

In fact, renters make up around 90% of new personal insolvencies. This is at odds with an economy where 31% of Australians rent.

People entering personal insolvency also have relatively little debt. 

Around half have debts of less than $50,000, compared to the average Australian household debt of more than $260,000.

Fifty thousand dollars. That’s the equivalent of a couple of credit cards, a personal loan and a handful of buy now pay later agreements.

In other words, personal insolvencies are largely skewed towards renters with unsecured debts and a low savings or asset base.

These debtors are less able to fortify their finances against external shocks such as the recent cost-of-living pressures or current geopolitical uncertainty.

3. The third observation regards the historic link between corporate and personal insolvencies.

Historically, personal insolvencies have followed trends in corporate insolvencies 9 to 12 months later.

But we’re not seeing that link so strongly in the current environment.

ASIC data shows corporate insolvencies grew by 39% in 2023-24, well above the increase in personal insolvencies that occurred last year and the anticipated increase this year.

These headline ASIC numbers need to be seen in the context that as a share of registered companies, corporate insolvencies are at the low end of normal compared with the early 2000s.

In other words, corporate insolvencies may be rising, but so are the number of incorporated businesses.

But while corporate insolvencies exceed the pre-COVID-19 average, personal insolvencies have still not trended back to those levels.

As I mentioned before, this highlights the value of a low unemployment rate. The current unemployment rate of 4.1% is well below the historical average of 5.5% pre-COVID.

When people have sufficient work, they’re far better equipped to meet their personal financial obligations.

4. My final insight concerns the role of business-related insolvencies in our system.

While we deal in personal insolvencies, this includes business-related personal insolvencies relating to sole traders and partnerships, which account for about 40% of Australian businesses.

Incorporated businesses go through the ASIC insolvency channel, unincorporated businesses come through ours.

Business-related insolvencies make up a quarter of overall personal insolvencies – about 3,000 a year.

But they make up three-quarters of system liabilities, or $13.2 billion out of $17.3 billion.

They’re a small part of the volume but they make up the lion’s share of the debts.

In that respect, the business community is an important part of our system.

How AFSA is responding

The 4 insights I’ve just given you give us a clear understanding of the changing dynamics in our ecosystem.

They enable us to continuously adapt our practices to meet the evolving needs of the Australian economy and community – and I’ll give you a few examples shortly.

And by sharing our insights, sharing them with you, we help foster collaboration and, ultimately, stronger financial regulation.

This gets to the collective stewardship I mentioned before.

We believe the system works best when we all work together.

In speaking engagements like these, no matter the audience, I have one clear message.

I convey it to insolvency practitioners, to creditors, to financial counsellors, and now to you as credit managers.

You are part of that collective stewardship. You may see things we don’t. So, we want to hear from you:

• Where you think the system can be improved. 
• Where you’re seeing emerging risks in the credit system. 
• Where you see system misuse. 

I need your eyes and ears. If you see something, say something. 

You can speak to me or your preferred AFSA contact, while our website provides further contact details, as well as an online tip-off form.

Our approach to regulation

In changing economic conditions and global uncertainty, we’ve shifted our regulatory posture over the past year to be more proactive in our education, compliance and enforcement activities.

This simple bell curve best describes our approach.

I’ll start in the middle because this is where the vast bulk of the people who enter our system – over 95% – sit.

Our responsibility to this cohort is to make it as easy as possible for them to use the system, through simple processes and communication.

We’ve reduced the number of systems people need to navigate from 8 to 3 – and we’re on our way to getting it down to one.

This part of the bell curve is called system efficiency. It’s high volume but low risk.

The other 2 parts of the curve are the other way around – low volume but high risk.

On the left side of the bell curve are those experiencing serious vulnerability.

People experiencing financial vulnerability often have other stresses in their lives, such as mental and physical health issues, addictions, or family and domestic violence.

People in this part of the curve – which is called system vulnerability – require a lot of individual support.

We need to take the time to understand their unique circumstances and help them navigate the system.

On the right side of the bell curve are those who deliberately misuse the system for their own benefit.

They undermine the integrity of the system and the community’s confidence in it – and they place people experiencing vulnerability at risk of even greater financial loss.

We call this part of the curve system misuse – and we have a number of active investigations.

In February, the Federal Court handed down a decision setting aside the personal insolvency agreement protecting Beau Hartnett and placing his estate into bankruptcy.

We had acted on concerns that the terms of the agreement were unreasonable or not in the interests of creditors.

This was the first time we had made such an application to the court under the Bankruptcy Act.

It highlights our commitment to act where we suspect deliberate system misuse, using all the legal tools at our disposal.

Through this and other actions, we’re sending clear signals to our regulated community that system abuse won’t be tolerated.

Last year, we cautioned a trustee who agreed to a proposal by 2 debtors to pay creditors as little as 0.00005c in the dollar, under the same legal mechanism used by Alan Bond to end his bankruptcy. 

After we intervened, the trustee chose not to proceed with the debtors’ offer and transferred the estates to other trustees, who resolved the case with significantly higher creditor returns. 

I have placed the practitioner community on notice that we expect more from them as joint stewards of the system.

I’ve made it clear to them that they should report misconduct when they see it, even if it’s in their own firm. 

This is part of the responsibility of their office and the position of trust they hold.

At the same time, we’re looking at how we can model best practice for the practitioner community, by positioning the Official Trustee as a model trustee.

So, we’re looking to lift our own game, as we ask registered practitioners to lift theirs.

Conclusion

Australia’s personal insolvency and credit systems are constantly evolving.

Our job is to maintain public trust in these systems as they evolve, so people can use them with confidence.

I’d argue it’s a job for all of us. We all benefit from a strong credit system that ensures access to finance.

If you see something, say something.

That’s how businesses grow, productivity grows, and the economy grows.

We welcome any insights you can give us and opportunities like this to share our insight with you.

Thank you.

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