Business late payments have surged to their highest levels since the conclusion of JobKeeper in March 2021, according to the latest Business Risk Index (BRI) released by CreditorWatch.
The report reveals that businesses are increasingly struggling to settle outstanding invoices, with B2B payments 60+ days overdue rising by 21.4% year-on-year and 7.9% since January.
This rise in arrears is driven by challenging business conditions, including higher interest rates, increasing costs of living and doing business, and reduced discretionary spending. The construction and hospitality sectors, already under pressure, show the highest rates of payment defaults, reflecting data from both CreditorWatch and ASIC.
While the proportion of overdue payments remains below pre-COVID levels—when tightened lending standards followed the Banking Royal Commission—the current environment indicates a softer economy. However, there are significant sectoral variations. Recent tax cuts could offer some relief in the coming months, but their full impact remains to be seen.
Construction and Hospitality Lead Payment Default Rates
In September, the construction sector registered a payment default rate of 1.77%, followed closely by hospitality at 1.67%. The construction industry continues to face long-standing challenges, compounded by the ATO’s renewed enforcement actions, while the hospitality sector has been hit by reduced consumer spending. The mining sector is also seeing a rise in defaults, attributed to falling commodity prices, with the exception of gold.
Other industries, such as information, media, telecommunications, and utilities, recorded the highest late payment rates, with arrears reaching 5.9%, 5.7%, and 5.2%, respectively.
Community Impact and Sector Outlook
CreditorWatch CEO, Patrick Coghlan, emphasized the ongoing cash flow pressures facing many businesses. “Weaker consumer demand is putting more strain on Australian businesses,” he noted. “The construction and hospitality sectors leading in defaults mirrors ABS data showing a decline in building approvals and stagnant spending in cafes and restaurants throughout 2024.”
Additionally, Food and Beverage Services continues to lead business closure rates at 8.3% over the past year, with forecasts suggesting closures could rise to 9.1% over the next 12 months.
Court actions, reflecting resumed collections by large creditors like banks and the ATO, have jumped 13.7% from July 2023 to July 2024, while credit enquiries have remained largely flat, indicating subdued business activity CreditorWatch’s Chief Economist, Ivan Colhoun, pointed to several factors likely to shape the economic landscape in the near term, including high interest rates, the cost of living, low unemployment, and lingering pandemic effects. Long-term trends such as AI and technology advancements, climate change, and global geopolitics will also influence the business environment.
“There are some early signs of economic support from the recent tax cuts, with stronger retail sales in August and improved consumer confidence in early October,” Colhoun said. However, he cautioned that interest rates will likely remain high until inflation lowers further, with potential rate cuts expected in early 2025.
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