Business trade lifts despite rising costs

The index reaffirmed earlier data from March, showing sustained growth in business activity despite supply constraints and increased input costs.

The increase in receivables was consistent with the Australian Bureau of Statistics’ (ABS) monthly business turnover indicator for March, which showed year-on-year increases in turnover across 11 of 13 industries.

However, the index also highlighted the growing pressure on businesses in South-East Queensland, with four of the 10 worst-performing regions located there and Brisbane ranking as the worst-performing capital city.

These regions faced challenges such as higher commercial rents, elevated personal insolvency rates, and lower median incomes.

Factors exacerbating the situation include additional interest rate rises affecting households with home loans, particularly in areas with many new housing estates.

Additionally, the Surfers Paradise region is burdened by higher commercial rents and reduced international tourism numbers, adding to financial difficulties for local businesses.

Overall business-to-business invoice trade receivables are up 36 per cent year on year due to rising inflation and trade activity resuming to “normal” post-COVID and credit inquiries were up 139 per cent year on year.

Insolvency risk lingers

Meanwhile, CreditorWatch chief economist Anneke Thompson warns economic conditions were “unstable” with business conditions generally positive, while consumer demand is dwindling.

“Given all the incoming data, there is little doubt that default rates and external administrations are going to increase,” she said.

“The areas that are going to be particularly impacted are those that are most reliant on labour, as labour supply still appears to be in strong demand, despite high overseas migration.

“Consumer confidence has now plummeted to record lows and has been sustainably low for some time.”

The data showed the food and beverage services industry faced the highest risk of default due to declining discretionary spending and ongoing challenges like labour shortages.

The construction industry experienced a continuous upward trend in external administrations, reaching its highest point since June 2020, while external administrations were still up 13 per cent year on year.

Among regions with over 5,000 businesses, Port Phillip (Victoria), Cairns South (Queensland), and Warringah (NSW) showed the most significant improvements in the rate of business failures.

Conversely, Chatswood-Lane Cove (NSW), Wyong (NSW), and Gosford (NSW) are experiencing the highest increases in the rate of business failures.

CreditorWatch chief executive Patrick Coghlan said while the increase in trade receivables was encouraging, other leading indicators are of concern.

“The pick up in trading activity is great to see but my excitement is tempered by our data on external administrations, in particular, which are rising across almost every industry,” he said.

“While this is a return to pre-COVID-19 levels in most instances, the rate of external administrations in industries such as healthcare and media/telecommunications is beginning to exceed that.”

[Related: Business activity returns to pre-covid levels: CreditorWatch]