Small business failures outpace decade average
Business-to-business (B2B) payment defaults surged by 19% in July and remained at elevated levels in August, according to the latest Business Risk Monitor from CreditorWatch.
The report also reveals that small business failure rates are now 12% above the 10-year average, with the weakest-rated firms experiencing closure rates exceeding 40% over the past year.
The monthly Business Risk Monitor, which builds on CreditorWatch’s previous risk reporting, provides detailed analysis of key financial indicators including payment defaults, insolvency trends, and ATO tax debt defaults. The findings indicate that, while overall insolvencies eased in August, this was largely due to temporary factors such as changes in ATO enforcement activity, rather than a fundamental improvement in credit conditions.
The report also highlights that one in four businesses with tax debts over $100,000 became insolvent within 12 months, underscoring the significance of ATO tax debt as a warning sign.
Regional analysis shows that inner-metro Adelaide, regional Victoria, and North Queensland are performing best, while Western Sydney and Southeast Queensland are identified as the highest-risk regions.
Economic conditions are showing some signs of stabilisation, supported by interest rate cuts and low unemployment. However, the report notes that global trade tensions and the risk of rising unemployment continue to pose threats to business stability.
“The Business Risk Monitor builds on the insights introduced in the Business Risk Index,” said Ivan Colhoun, chief economist at CreditorWatch. “It focuses on the interaction between the economic variables impacting the credit cycle, CreditorWatch’s unique payments default and ratings trend data, ATO tax default trends and the monthly insolvency statistics released by ASIC to produce a comprehensive overview of the factors affecting credit in Australian businesses."
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