Australia’s economy is giving off a “stress signal” with the debt held on commercial credit cards reaching a record level.
Analysis from Credit 2024 and Primara Research found that 23.7 per cent of the record $2.26 billion in debt is held in high-interest balances, a situation that could soon start to tighten businesses’ balance sheets.
“Commercial card use going up is not the issue; that’s efficient cash flow management,” said Peter Drennan, head of research and data at Primara Research.
“The issue is the balances that aren’t clearing. High-interest commercial debt is typically a last resort, and seeing it at record levels while personal card stress remains steady suggests the pressure is sitting squarely with businesses.”
Commercial card transactions have increased by 31 per cent over the past two years, now totalling $125 billion annually. This growth, however, has been outpaced by the growth in high-interest balances, up by 40 per cent over the same period.
Primara says that the average commercial card transaction is now almost $500.
“This is a business-side stress signal, and it may be an early one,” Drennan added. “The flat account numbers tell you this isn’t a story about more businesses using credit cards.
“It’s a story about businesses already using them, carrying more debt than they can service. Businesses carry it first. If it reaches personal cards, the problem is no longer contained.”
