An insolvency expert says the return of international tourists might be enough to save businesses on the verge of collapse.
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Tompkins Wake insolvency specialist Wayne Hofer said the market was "eerily quiet", but expected it could be the calm before the storm, with economic conditions ideal for a large increase in the number of business insolvencies.
"A labour shortage is a recipe for economic pain in and of itself. When you add ingredients, such as supply chain disruptions, record inflation, and Omicron and the mandatory isolation periods this should mean a surge of insolvencies," he said.
"Some businesses had already seen their bottom line reduce drastically. If they have no staff, they cannot open their doors, they cannot get enough money coming in to pay the expenses," Hofer said, adding many were likely at the point of being technically insolvent.
Businesses had a two-limb test to be legally solvent, he said. The value of a company's assets must be greater than the value of its liabilities, including contingent liabilities and the company must be able to pay its debts as they become due in the normal course of business.
"If you can see a light at the end of the tunnel, they're happy to keep going because they can see the light. Whereas I think we're sort of experiencing a tunnel that just keeps getting longer and without any certainty of when the light is going to come," he said.
"In some some businesses money will actually just run out and other businesses, we might just see that the emotional toll becomes too great and people just fold companies because they tired of the constant fight and the constant uncertainty."
Unless conditions changed there was likely to be a big uptick in insolvencies in the third and fourth quarter of the year, Hofer said.
But the quarantine-free reopening of the border for international tourists could be enough to save businesses on the edge, he added.
Chapman Tripp finance partner Cathryn Barber said in any case, it was only a matter of time before the number of insolvencies picked up.
"Over the last two years people have been predicting that insolvencies would rise and that hasn't happened to date," Barber said.
"The government is working very hard to support these small businesses but at some point enough is enough and some of them won't be able to keep going."
