Construction collapse
Given that I've written a lot about the construction downturn over the past couple of years, this was a headline from the ABC which really grabbed my attention:
You couldn't really help but notice it, to be fair, given that it was immediately reproduced virtually all over the entire internet.
I thought I'd run the numbers as a bit of a sense check (or fact check, if you will!).
And here's what we got:
So, yeah, I'm not seeing a record rate of collapse here, and the data series only goes back to September 2013 in any case.
Let's rip out the numbers by state to see the trend for New South Wales construction companies:
Trending higher as expected, but actually the number has been higher previously, even since the financial crisis:
Ralan collapse
Now it is true that there's an issue with phoenix activity, while crucially the actual number of company insolvencies is far less important than their materiality.
And then it's the flow-on impact to tradies and subbies that can really cripple an economy when the multiplier goes into reverse.
And then it's the flow-on impact to tradies and subbies that can really cripple an economy when the multiplier goes into reverse.
The recent collapse of the giant developer the Ralan Group will have serious ramifications, not least because it might leave group creditors up poo creek up the tune of $500 million.
It's remarkable how many people - or maybe it's just the people who message me - are hoping for a full blown collapse and recession, and many remain adamant that a banking crisis is unavoidable as apartment construction implodes.
I sincerely they will be wrong, yet they may be proven right.
Generally speaking, I'm an optimist, and do believe that a banking crisis can be averted provided banks are willing and able to lend to people that want to borrow (and my direct industry experience tells me there are many that want to borrow but aren't able to), including to developers.
It all seems to be hanging rather on a thread, though, as lenders seem to have developed a weird and unhealthy obsession with scrutinising how much people spend on coffee, Uber Eats, or subscription services, as though this somehow correlates with default risk.
Strange times!
