While construction continues to dominate Australia’s insolvency landscape, new analysis by Cathro & Partners shows that hospitality and healthcare are now emerging as the next major pressure points, revealing that the nation’s business failures are deepening beyond traditional sectors.
Drawing on ASIC insolvency filings and Australian Business Register (ABR) company registrations, Cathro’s proprietary Cathro Clarity tool identifies that both hospitality and healthcare have recorded the sharpest increases in insolvency rates since FY2022, despite stable or even rising business registrations.
Simon Cathro, Managing Principal observes that “the construction sector continues to experience a substantial amount of upheaval, and the flow-on effects of material price rises, and ongoing cost-of-living pressures will likely continue for some time. However, we’re now seeing a structural shift, and business failures are no longer confined to construction. Highly regulated, people-intensive industries such as healthcare and hospitality are increasingly under strain, challenged by governance shortcomings, tight margins, and complex compliance requirements.”
The big picture: Insolvencies rising faster than registrations
Nationally, total business registrations (ABR) have grown from 2.54 million in FY22 to 2.73 million in FY25, a 7% increase. But insolvencies have more than doubled over the same period. The rise is most pronounced in sectors with thin profit margins, high staff dependency, or heavy compliance obligations.
Cathro Clarity’s comparative modelling shows failure rates of:
- Hospitality: 0.73% of total registered entities
- Healthcare: 0.32% of total registered entities
- Construction: 0.27% of total registered entities
While these percentages may seem small, the growth trajectory indicates that financial fragility is outpacing business formation in key industries.
Analysis in more detail:
Hospitality: Collapsing under cost pressures
The hospitality sector has seen one of the steepest jumps in insolvencies, climbing from 855 in FY22 to 3,255 in FY25. Over the same period, the number of registered businesses has grown by less than 3%, highlighting a significant rise in closure risk.
Cathro Clarity’s analysis points to a “perfect storm” of challenges such as rising rents, staff shortages, wage inflation, and declining discretionary spending.
“This is no longer a story about poor performance, it’s structural,” said Simon Cathro.
“Many small operators have reached their financial ceiling, with minimal buffer to withstand shocks.”
Healthcare: Governance and complexity fuel risk
Insolvencies in healthcare have risen from 96 to 675 cases since FY22, despite a 22% rise in business registrations over the same period. The Cathro Clarity platform attributes this escalation primarily to entities linked to the National Disability Insurance Scheme (NDIS), where weak financial governance, poor forecasting, and board-level inexperience are becoming systemic risks.
The dramatic increase in insolvency rates in the healthcare sector is a sign of a change in a part of the economy that was previously seen as very resilient,” Chris Bergin, Principal in our Melbourne office said.
“The NDIS has, perhaps unintentionally, created a highly regulated yet commercially fragile segment of the healthcare industry. It’s one where governance, financial oversight, and risk controls haven’t evolved fast enough to match the sector’s rapid growth.”
Construction: Still the Largest Contributor, But Plateauing
Construction continues to account for the highest share of insolvencies with 13,673 failures since FY22, representing 26% of all corporate collapses. Annual appointments jumped from 1,641 in FY22 to 4,871 in FY25, according to ASIC data.
However, Cathro Clarity’s comparative analysis shows the failure rate has stabilised relative to total registrations, suggesting the crisis may be shifting elsewhere.
Cathro & Partners developed Cathro Clarity to move beyond traditional insolvency statistics. The platform combines real-time ASIC and ABR data with proprietary analytics to visualise sectoral stress before it peaks.
“Traditional reporting tells you what happened, not why or what’s next,” said Simon Cathro. “Cathro Clarity bridges that gap, giving lenders, directors, and regulators visibility into where business risk is forming, not just where it has already broken down.”
For more information, please contact:
Simon Cathro, Cathro & Partners
MOB: 0416 014 889
