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CreditorWatch has suggested that Australia’s economic recovery has lost some momentum, as it has tracked a 9 per cent increase in credit defaults across businesses.
The May CreditorWatch Business Review has shown that although credit defaults were 43 per cent lower for the three months to May, compared with the same period last year, they had grown by 9 per cent on the prior quarter. May had seen a 9.8 per cent increase in payment defaults on April.
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The number of external administrations also rose by 24 per cent from the quarter before, although they were down by 6.5 per cent compared with the May quarter in 2020.
But credit enquires were trending upwards, having risen on an annual basis for eight months straight. In the three months to May, the number of enquiries was 39 per cent higher than the prior quarter and 52 per cent higher than the previous year.
CreditorWatch has labelled the findings a mixed bag, with annual improvements contrasting against more recent developments.
The credit agency believes the data could indicate that small and medium-sized enterprises may be starting to struggle more in a post-JobKeeper environment. The report has also noted a 0.3 per cent slip in company profits following the end of COVID stimulus measures.
Patrick Coghlan, chief executive of CreditorWatch, called the quarterly changes in defaults and external administrations “one of the first red flags”.
Since April last year, defaults have remained 50 per cent lower than pre-COVID figures, largely due to government stimulus support. The report noted the focus will now be on the next steps to recover the numbers to pre-pandemic levels, with the June and September quarters to reveal the true post-stimulus conditions.
“We’ve been saying for some time we won’t be able to get a true picture of the economic health of the nation until federal government stimulus measures, such as JobKeeper, have ended and their impact artificially propping up some business,” Mr Coghlan said.
“Early signs from the Business Risk Review suggest there will be a shake-out of poorly performing businesses over the coming two quarters.”
However, the RBA’s statement for its June monetary policy decision indicated the bank is expecting 4.75 per cent growth this year, followed by a drop in 2022 to 3.5 per cent GDP growth. Unemployment is also expected to fall to 5 per cent at the end of the year, from its current 5.5 per cent.
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