This month’s Index highlights that Australian businesses are facing significant and increasing pressure, with leading indicators including external administrations, B2B trade payment defaults, court actions and credit enquiries all trending upward sharply. Businesses are continuing to struggle with rising interest rates, high inflation, decreasing demand and declining forward orders.

When assessing the regions most impacted, BRI data revealed that for the past 12 months, three of the five biggest movers down the index are all adjoining – Wyong, Gosford and Lower Hunter – and likely to be disproportionately affected by rising interest rates, while nearby Newcastle struggles with very high commercial rental and property costs.

Key Business Risk Index insights for May:

  • External administrations dipped from March to April due to seasonality but are now up 35% YoY.
  • Court actions also dropped in March due to seasonality but are now up 50% YoY.
  • Credit enquiries are up a massive 85% year-on-year as businesses become more nervous about the health of their trading partners and tighten credit policies.
  • B2B trade payment defaults are up 31% YoY, with Food and Beverage Services the number one ranked industry for probability of default by a considerable margin.
  • Merrylands-Guildford and Canterbury, in Western Sydney, remain the worst performing regions in Australia for default rates.
  • Casey-South in Victoria has entered the top 10 worst performing regions for the first time with a projected default rate of 7% over the next 12 months.
  • Unley in South Australia is the region with the lowest insolvency risk (across regions with more than 5,000 businesses), followed by Norwood-Payneham-St Peters, also in SA.
  • The rate of external administrations in the construction industry continue to trend upward – sitting at their highest point since June 2020.
  • The rate of external administrations in the Healthcare and Social Assistance sector, while still low, has more than doubled over the past 12 months.

External administrations in the retail sector are currently well below their pre-Covid levels, although on a rising trend. Given the current trading conditions, it is expected that further administrations in the Retail Trade sector will be recorded, particularly amongst retailers who can’t clear overhanging stock levels.

In addition, to the Australian consumer being far more cautious, short term visitors to Australia have not recovered following the re-opening on international travel. This will weigh heavily on areas particularly around South East Queensland, who rely heavily on both local and international tourists.

CreditorWatch CEO, Patrick Coghlan, says pressures are mounting on businesses across all industries, noting a clear upward trend in the rate of external administrations in almost all sectors, with mining being one of few exceptions.

CreditorWatch Chief Economist, Anneke Thompson, says that it is unlikely that the RBA will consider lowering interest rates until at least min-2024, due to core inflation remaining stubbornly high. Click here for Anneke’s Industry Insights for the month of May, which outline how the current economic environment is impacting the Retail and Travel sectors.

CreditorWatch encourages businesses to engage in regular monitoring and to perform proper due diligence on their trading partners to avoid becoming an unfortunate statistic.