CreditorWatch, Australia’s leading credit reporting agency, today releases the November Business Risk Index (BRI), a monthly report offering a clear, accurate and insightful view of the health of Australian businesses.
The latest BRI reveals business failure rates across 2025 have been highest across the three eastern states of NSW, Queensland and Victoria. On a capital-city basis, high commercial rents and property prices in Sydney and Brisbane have placed a major strain on SMEs, in addition to cost pressures such as increases in insurance premiums, wages and utilities.
While all state capitals saw a lift in business failures over the past year, businesses in Greater Sydney and Greater Brisbane both experienced failure rates of 5.82% in the 12 months to 30 November 2025, up from 5.48% and 5.18% in November 2024, respectively. In contrast, Melbourne recorded 5.55%, Hobart 5.07%, Adelaide 4.73% and Perth 4.70% in the twelve months to 30 November 2025.
Despite Sydney and Brisbane currently having the highest rates of business failure in the nation among state capitals, rates of failure are starting to level off – as they are in Perth. Failure rates in the other state capitals continue to increase. Sydney’s failure rate growth was the second lowest of the capital cities in the 12 months to November 2025, after Perth. Hobart had the highest, followed by Brisbane.
CreditorWatch CEO Patrick Coghlan says, “Our Business Risk Index highlights a clear divergence: larger capitals like Sydney and Brisbane still lead in failure rates, but their growth trajectory is flattening compared to Hobart and Adelaide. These cities’ smaller, steadier business environments shield them from the volatility seen in larger capitals.
“However, the key underlying pressures – high costs, subdued demand and tight margins – are far from resolved. Businesses need to remain vigilant and proactive in managing risk as these financial pressures will remain throughout 2026, particularly if the RBA raise interest rates to bring inflation under control.”
More broadly, insolvencies dropped back in November and appear to be oscillating around a flat or gradually improving trend. Insolvencies remain well below the levels of late 2024 and around the levels that have applied for much of the second half of 2025.
At a sector level, insolvencies have risen in Transport, Postal and Warehousing, Retail Trade and Manufacturing and remain elevated – but stable – in Construction. There have been encouraging improvements in recent months in insolvencies in Wholesale Trade and Food and Beverage Services.
Most data suggest a broadly sideways trend for insolvencies in the next few quarters. Given factors such as the number of new companies with tax debts in excess of $100,000, is oscillating around a broadly flat trend.
However, trade payment defaults – one of the best early warning indicators of potential insolvency – provide for some caution to this assessment. Payment defaults eased slightly in November but remain near the highest levels recorded, which suggests many firms continue to experience financial pressure.
CreditorWatch’s Economic Conditions Tracker continues to report an improvement in economic conditions over the past 12 to 18 months to a level around long-run average conditions. This average however combines the positive of lower-than-average unemployment and below average levels of family finances. It reflects cost of living pressures, coexisting with favourably low unemployment.
CreditorWatch Chief Economist Ivan Colhoun says, “It’s likely that the period of improving economic conditions may be coming to an end as higher inflationary readings in late 2025 halt interest rate reductions and increase the risk of an earlier return to higher interest rates in 2026.
“The RBA Board signalled in early December that it would be closely monitoring upcoming inflation data for evidence that above-target inflation was persisting. This suggests a higher-than-expected Q4 CPI could see an interest rate increase as early as the February Board Meeting.
“If realised, this would likely reimpose financial pressures on many households and businesses and contribute to less favourable business and credit conditions. One possible offset might be an emerging upturn in parts of the Mining sector due to much higher prices for some commodities such as gold, silver and copper. Overall, these developments suggest that the rate and level of insolvencies will likely remain somewhat elevated in the year ahead.”
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