Australians are slashing discretionary spending as financial pressure intensifies, creating recession-like conditions across parts of the economy, according to national insolvency solutions and business rescue firm Jirsch Sutherland. Millennials, renters, and those working in trades, labour-intensive, and construction-related occupations are bearing the brunt of Australia's cost-of-living squeeze.
The warning follows new data from the Australian Financial Security Authority (AFSA), which revealed personal insolvencies rose to 3,161 in the March quarter 2026 – up 6.2 per cent on the March quarter 2025. Business-related personal insolvencies also climbed, accounting for just under a third (29.2%) of all new filings for the quarter. The just-released April figures also point to continued financial strain, with 1,113 new personal insolvencies recorded during the month, including 333 business-related personal insolvencies.
"While Australia may have avoided a technical recession, many households and businesses are experiencing recession-like conditions," says Jirsch Sutherland Partner and dual Registered Liquidator and Bankruptcy Trustee Chris Baskerville. "Consumers are becoming far more selective about where their money goes. Discretionary spending is under severe pressure, and small businesses are feeling the impact."
Baskerville says what the firm previously described as "date-night economics" – consumers cutting back on entertainment and dining out – has intensified as households grapple with prolonged cost-of-living pressure and shrinking buffers. "We're seeing households strictly prioritise mortgages, rent, utilities, fuel, insurance and groceries," he says. "That slowdown flows quickly through to cafes, restaurants, retailers, trades and other SMEs already operating on razor-thin margins."
Businesses are simultaneously grappling with weaker consumer demand, elevated operating costs and increasingly active debt recovery action from the ATO, Big Four banks and other creditors, Baskerville adds.
"We're increasingly seeing business owners dip into personal savings and unsecured credit cards just to keep operating. Financial pressure is no longer isolated to business balance sheets – it's hitting households hard," he says. "Many of these cases involve small business owners whose personal and business finances have become deeply intertwined, making it increasingly difficult to separate household financial stress from business distress."
Peak pressure for Millennials
AFSA's data also highlights growing financial pressure among Australians in their prime earning and asset-building years, with people aged 30-34 accounting for the largest share of individuals entering personal insolvency in the March quarter. AFSA's 2024-25 demographic analysis further shows a disproportionate impact on renters and those working in trades, labour-intensive and construction-related occupations.
"These people aren't necessarily unemployed; many are fully employed but have simply exhausted their financial buffers after several years of compounding rising costs," Baskerville says.
Overcoming the insolvency stigma
Importantly, Baskerville stresses that experiencing this level of financial distress does not signify a definitive end.
"Unfortunately, there is still a social stigma attached to insolvency, but the reality is that this formal system exists to act as a vital safety valve," Baskerville says. "The worst thing people can do is ignore the problem and hope it goes away. The earlier someone seeks advice, the more options they typically have available.
"Insolvency doesn't automatically mean failure or end of the road. For thousands of Australians buckling under unsustainable debt, it provides immediate legal protection, caps the crisis, and acts as an immense relief valve for people's mental health and financial future."
Key AFSA findings:
- March quarter surge: There were 3,161 new personal insolvencies in the March quarter 2026 (consisting of 1,749 bankruptcies and 1,356 debt agreements), up 6.2 per cent from the 2,977 recorded in the March quarter 2025.
- Geographic spread: New personal insolvency cases rose across every state and territory, led by NSW (967), Victoria (721) and Queensland (779), followed by WA (248), SA (172), Tasmania (71), the ACT (34) and the NT (30).
- Business pressure: Business-related personal insolvencies accounted for 29.2 per cent of all new cases (924 total), up from 847 in the previous corresponding period.
- Sector risk: The construction and 'Other Services' (hospitality, personal care) industries accounted for more than one-third of all business-related personal insolvencies, with retail, healthcare, and transport also highly vulnerable.
- Peak pressure for Millennials: People aged 30-34 accounted for the largest share of personal insolvencies in the March quarter, highlighting the impact of sustained cost-of-living pressures in their peak earning years.
- The debt share: Long-term data shows business-related personal insolvencies account for less than one-third of new cases, but an overwhelming 79 per cent of total liabilities – with sole traders bearing the brunt, owing 75 per cent of these debts to corporate business creditors and 17.4 per cent to government agencies like the ATO.
- Renters bear the brunt: AFSA's 2024-25 demographic analysis shows personal insolvencies remain heavily concentrated among renters.
