Despite ongoing efforts to address the issue of late payments, the latest Business Risk Index (BRI) report from credit reporting bureau CreditorWatch has revealed that late payments are at their highest rate this September 2024 period, the highest since the end of JobKeeper in March 2021.
CreditorWatch data revealed that the rate of B2B payments that are 60+ days in arrears is up 21.4 per cent year-on-year and 7.9 per cent since January. This is considered an indicator of a combination of more challenging business conditions, such as higher interest rates, and higher costs of living/doing business.
Data also suggests that the proportion of payments in arrears remains below that experienced in the pre-COVID period, which was a relatively soft period for economic growth in the Australian economy in the aftermath of the Banking Royal Commission when the banks tightened lending standards. However, the report pointed out that it is not an indicator of a weak economy.
There has also been a decrease in discretionary spending and activity and demand, especially in interest-rate sensitive sectors, especially for the Construction and Food and Beverage Services sectors. Data suggests that this is an indicator of a softer economy at the present time, but not an especially weak economy overall.
The information, media and telecommunications sector has the highest rate of late payment among all industries, recording a rate of 5.9 per cent, followed by Electricity, Gas, Water and Waste Services (5.7 per cent) and Financial and Insurance Services (5.2 per cent). Meanwhile, the construction and hospitality sectors currently have the highest rates of payment defaults, at 1.77 per cent and 1.67 per cent respectively.
The research also noted that businesses with a high degree of government support or funding continue to experience lower rates of default, as do many services that include financial and insurance services. However, the forthcoming caps on foreign students could produce less favourable conditions for Education and Training providers. And while the rural sector has been doing well after three favourable seasons in a row, they may face increased pressures as commodities such as beef are expected to hit lower prices.
CreditorWatch CEO Patrick Coghlan commented that the deteriorating B2B payment times and the upward trend in payment defaults indicate that many businesses are still under considerable cashflow pressure.
“Ongoing economic impacts such as weaker consumer demand are clearly bringing more pressure to bear on Australian businesses,” he said. “The fact that the construction and hospitality sectors have the highest rates of payment defaults and construction has the highest rates of arrears, mirrors the latest ABS data showing declining building approvals and flat spending in cafes and restaurants across much of 2024.”
