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INTRODUCTION: ONE YEAR CAN MAKE ALL THE DIFFERENCE
In August 2024, Alvarez & Marsal (A&M) partnered with the Turnaround Management Association Australia (TMA) to survey over 140 TMA professionals on the key trends shaping the turnaround profession and broader economy. At the time, the market was marked by uncertainty, caution, and worry of looming recession.
This year, we once again partnered with the Turnaround Management Association—this time surveying over 180 professionals. What did we find? The mood has shifted. Optimism has returned—cautious, certainly, but unmistakable. As we delved into the results, one thing became clear: Australia's turnaround market is entering a new phase, shaped by the country's current economic outlook. So, what's driving this change?
Australia's economy is finally showing signs of recovery after years of being buffeted by the impact of the Covid-19 pandemic, a cost-of-living crisis and rising interest rates. Sentiment is improving amid easing inflationary pressures and three interest-rate cuts this year.
But while the rate cuts are boosting sentiment, they are yet to translate into real impact for businesses grappling with challenges on the ground. In 2025, insolvencies remain worryingly high, with 13,413 companies entering external administration in the financial year through May, a jump of 34% from the year earlier period1. There is also significant stress in sectors such as construction and healthcare. Beyond Australia's domestic economy, global risks are rising amid constantly evolving tariffs and growing geopolitical tensions.
At the same time, the rapid growth of private credit and alternative financing over the past 12-18 months means there is now plenty of liquidity in the market, offering companies access to more capital, often at competitive terms, to help with stressed situations.
This report outlines the broader results from the survey along with A&M's perspectives into the specific issues affecting industries such as construction, healthcare, retail and mining.
Bright Spots on the Horizon - But the Journey is Far from Over
To provide context to the survey responses and A&M's experts views, here is a quick snapshot of the current macroeconomic backdrop:
- Falling interest rates
The benchmark rate dropped to a two-year low of 3.6% in August2. The Reserve Bank of Australia (RBA) began to cut rates earlier this year, marking a shift in monetary policy after an aggressive tightening cycle in 2022-23, and in August signalled a "couple more cuts" are required to achieve its latest forecasts. The RBA held the benchmark rate steady in September. - Easing inflationary pressures
Headline inflation slowed to 2.1% in the quarter through June, while trimmed mean inflation hit its lowest since December 20213. - GDP growth
The economy is showing signs of recovery, with fasterthan-expected growth in the second quarter driven by household and government consumption.
However, it won't be smooth sailing just yet, with the RBA cutting its 2025 forecast, saying a weaker-thanexpected increase in public demand early on is unlikely to be offset through the rest of the year. - Stalling productivity
Australia's labour productivity has stagnated in recent years after a burst of "Covid productivity," causing concern about its long-term economic impact. While there was a slight lift in the June quarter, productivity remains near levels seen at the end of 20194. - Wage Inflation
Wage inflation remains elevated, underscoring a tight labour market. The Wage Price Index rose an annual 3.4% in the June quarter.5
These indicators offer a mixed picture of the broader economy. While easing inflationary pressures and falling interestrates are likely to have a positive impact, the path ahead is not without challenges. Businesses continue to face significant pressures on profits and cash flow.
Does this mean that the brightening economic outlook offers too little too late for stressed and distressed companies? Read on for our main survey findings and their implications for businesses in the coming months.
KEY INSIGHTS: TURNAROUND MARKET AT A CROSSROADS
The insights below reflect a market in transition—one where confidence is growing, but the scars of recent economic turbulence remain visible.
Insight #1
A New Dawn of Optimism: Recession Fears Fade
The perceived threat of a recession has receded significantly. 63% of respondents in our survey say a recession is unlikely in the next 24 months, up from 37% last year.
Insight #2
Winds of Change: Macroeconomic Indicators Signal Stability Ahead
Underpinning that confidence is respondents' increasingly positive view of macroeconomic indicators compared to a year ago. 72% expect interest rates to drop in the next 12 months, versus 38% expecting only a slight decline a year ago. 59% expect inflation to remain stable (up from 30% in 2024).
Insight #3
The Lingering Storm: Inflation and Debt – The Twin Challenges For Business
The lingering impact of these headwinds remains evident. Input cost inflation and over-leveraged capital structures continue to be the most significant challenges, ranking first and second respectively. Close behind are wage inflation, cash flow management, and ongoing supply chain and working capital pressures.
Insight #4
Stress Test: Construction and Healthcare Sectors Under Siege
Among sectors, respondents ranked construction as the industry most likely to be under high or very high stress in the next 12 months (86%), followed by healthcare (76%), manufacturing (73%) and retail, consumer goods and services (75%).
Insight #5
The Playbook for Survival: Strategic Priorities for Resilient Organisations
To address market challenges, most respondents are seeing organisations focus more on initiatives such as cash management (84%), turnaround/transfer programmes (80%) and improving financial hygiene such as business planning (79%).
Insight #6
Safe Harbour on the Horizon: A Growing Focus on Proactive Stabilisation
With insolvencies skyrocketing, it should come as no surprise that a good portion of participants (35%) expect safe harbour engagements – introduced in 2018 to protect company directors from insolvent trading personal liability – to increase or remain at current levels in the next 12 months.
Insight #7
The AI Revolution: Transforming the Turnaround Industry
While businesses face mounting pressures, our survey also turned the spotlight on the turnaround industry itself, exploring the critical capabilities it must develop to effectively support companies in navigating these challenges. AI emerged as the clear winner in our survey with 78% of respondents believing the industry must invest to better serve clients.
Footnotes
2 https://www.cnbc.com/2025/08/12/rba-policy-decision-inflation-australia.html
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