Business Failure and Change : An Australian Perspective

Contrary to common perceptions, most Australian businesses survive for a considerable time. For example, around two thirds of businesses are still operating after five years and almost half are still operating after ten years. Around 7.5 percent of businesses exit each year cessations account for around 80 percent of exits (changes in ownership account for the remainder), but most exits are not firm failures. Each year, cessations account for, at most, between 10 percent of total job losses and 4 percent of GDP; however, in net terms, these impacts are outweighed by the corresponding gains from new business start-ups. Less than 0.5 percent of businesses exit each year due to catastrophic failure (bankruptcy or liquidation). The failure rate has fallen significantly in the past decade. The estimated failure rate was 3.6 failures per 1000 enterprises in 1999-00, one third of the rate in 1991-92. The decline is attributable to fewer company liquidations, rather than any fall-off in unincorporated business bankruptcies