Prior to anticipated economic downturns, personal insolvency and bankruptcies have increased in Central Victoria.

As Victorians battle to recover from poor salaries and the consequences of the coronavirus epidemic, a leading social assistance organisation in Central Victoria warns that an increasing number of people are declaring personal insolvency or declaring bankruptcy.

  • Anglicae Victoria reports an increase in bankruptcies and personal bankruptcies;
  • Bankruptcy is a legal process that can discharge debts, whereas personal insolvency is the inability to pay them;
  • Unions, social service organisations, and a corporate coalition all agree that raising the minimum wage would be beneficial.

As a result, Anglicare Victoria is planning for a commensurate rise in demand for its financial assistance programmes.

While there were fewer requests for assistance in the current quarter compared to the previous quarter, people’s financial situations had deteriorated, according to Michael Oerlemans, the regional director for Northern Victoria.

He expects Anglicare Victoria to get more requests for assistance as a result of growing inflation (5.1% as of last week) and the Reserve Bank’s hike in the cash rate (from 0.75 to 0.8%) on Tuesday.

It had been “approximately three or four years since we’ve seen it at this [lower] level,” he said, which was pretty shocking.

“There hasn’t been much of a demand rise lately,” since inflation has been quite low.

However, the effects of growing electricity bills and rate hikes this winter should become apparent in the following months.

Bankruptcy vs. Insolvency

Personal bankruptcy, which may permanently discharge you of your duties, refers to a temporary inability to pay your bills when they are due.

According to Mr. Oerlemans, for some, bankruptcy is a positive conclusion since it allows them to start over while financial counsellors negotiate with creditors to resolve outstanding invoices and payments.

He said that bankruptcy is not always a negative thing for those who are deeply in debt, adding that “some of them will be in a position where they should have had treatment sooner.”

It does alleviate them of this financial burden. It enables services to bargain with their creditors. Furthermore, it provides the individual with a new start.”

The Fair Work Commission has stated that, effective July 1, the minimum wage will rise from its existing base rate of $20.33 per hour to $21.38 per hour, a 5.2% increase that corresponds to an increase in the number of people who are unable to meet their commitments or have declared bankruptcy.

For employees earning less than $869.60 per week, the minimum wage rise is $40 per week, for a total increase of 4.6%. (a drop in actual salary as a result of inflation).

According to the commision, the verdict would impact approximately 2.7 million workers and employees covered by business agreements and awards.

Pay increases are a “comfort.”

According to Luke Martin, secretary of the Bendigo Trades Hall Council, the union movement and the Australian Council of Trade Unions (ACTU) requested a 5.5% rise in the minimum wage, which was much more than the inflation rate.

He pointed out that many of the country’s lowest-paid workers will benefit from this.

He said that an additional $40 per week “helps them pay their bills, puts food on the table, and maintains a roof over their heads, and is such a huge relief for them.”

If the government is to succeed, it must prioritise assisting the middle and working classes.

The pay increase, according to Rob Stephenson, former dean of La Trobe University’s Bendigo campus and former CEO of the business advocacy group Be Bendigo, will help cushion the predicted 7% inflation.

A considerable proportion of people will not put their windfall into term deposits. He vowed that all of it would be reinvested in the economy.

“We also often notice that when the minimum wage rises, many firms suffer a substantial spike in turnover.”