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Business conditions worse before they get better: CreditorWatch


A drop in invoice values and a rise in defaults point to a challenging year ahead, says the credit bureau’s latest data.

By Philip King 13 minute read

A huge fall in business activity in January following a disappointing December points to a tougher-than-expected year ahead, according to the latest data from CreditorWatch.

Its January Business Risk Index showed business-to-business invoices down 19 per cent compared with a year ago. The credit bureau forecasts trading conditions to become even tougher this year despite mixed results from two mainstream indexes this week.

A rise in the Westpac-Melbourne Institute consumer sentiment – spurred by positive inflation results – took it to the highest level in 18 months but the NAB business confidence index slumped to below its low-term average in a sign “confidence remains weak”.


CreditorWatch chief economist Anneke Thompson said that taken together, the data showed businesses expected weaker conditions for at least the next six months.

“Consumers seem to be watching data trends closely, but maybe reacting a little too quickly to good economic news,” she said.

“Regardless, given the low levels of savings and very high housing costs that both renters and mortgage holders are paying, it won’t be until we see real relief in interest rates and rental inflation that discretionary spending will recover.”

“It is looking increasingly likely that the first half of 2024 will be some of the most challenging operating conditions many businesses will have ever experienced.”

The January CreditorWatch survey also revealed:

  • Business-to-business trade payment defaults up 55 per cent year-on-year.
  • External administrations consistently above pre-pandemic levels.
  • There was a significant decline in credit enquiries as trade activity slowed.
  • Court actions are at their highest point since April 2020.
  • Regions with the highest risk of business failure were in Western Sydney and South-East Queensland.

CEO Patrick Coghlan said businesses would be hoping for an early cut in interest rates.

“The retail trade numbers for December clearly showed that interest rate increases and high inflation are now exerting a huge amount of pressure on households, which translates to lower demand for goods and services,” he said.

“Our hope is that interest rate relief arrives sooner rather than later to ease cost-of-living pressures and stimulate demand.”

CreditorWatch said the drop in order values was consistent with the subdued Christmas retail period, which saw sales plunge 2.7 per cent from November to December. Cafés and restaurants also saw a decline in trade towards the end of the year rather than the expected uplift.

It said the elevated level of trade payment defaults – 55 per cent higher than January 2023 – meant that businesses were taking action against late payments because cash flow was critical when interest rates were high.

The industries with the highest probability of business failure over the next 12 months were accommodation (5.09 per cent), public administration and safety (5.14 per cent), and food and beverage services (5.88 per cent).

It said the food and beverage sector confronted “significant challenges” with “diners are already spending less at cafes and restaurants than they were in the middle of 2023” despite strong population growth.

“Clearly, there are many Australian households that are substituting eating out with eating at home,” the bureau said.

“The government’s move to reign in population growth through lower levels of student visas will have a major impact on the economy over the next year.”

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Philip King

Philip King


Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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