In fact, average trade receivables for June were down 18 per cent year-on-year.
Another key indicator, trade payment defaults, is up 18 per cent year-on-year, reflecting the recent slight decline in the NAB Business Confidence Index.
Additionally, court actions are at their highest rate since March 2020 (pre-COVID), indicating that lenders have resumed their regular collections activity.
The key Business Risk Index insights for June showed that trade receivables and credit inquiries are down month-on-month, indicating that business confidence is at a turning point.
Meanwhile, credit inquiries dipped marginally from May to June but are still up 8 per cent year-on-year.
The Business Risk Index national default rate remained flat at 5.8 per cent in June. CreditWatch noted that it is far more likely than not that its forecast default rates will climb, given the deteriorating economic outlook.
CreditorWatch also continued to forecast a rise in business insolvencies across 2022.
In Western Australia, Cottesloe-Claremont has the lowest insolvency risk region with greater than 5,000 businesses, while in the Western Sydney region of Merrylands, Guildford is the highest risk region in the country.
CreditorWatch chief executive Patrick Coghlan said the June Business Risk Index data indicates that businesses could be in for a softer second half of 2022.
“We continue to see a disturbing rise in trade payment defaults, our leading indicator for future business insolvencies,” he said. “Court actions are also back to pre-COVID levels, reflecting that the banks are back to their regular collection activity after the ‘loan holidays’ that they provided during the peak of the pandemic. We will be closely watching the data to see if these figures indicate an inflection point in business confidence as economic conditions worsen.”
CreditorWatch chief economist Anneke Thompson said while Australian businesses have been operating at record capacity levels and business conditions are still slightly better than the long-term average, the June data is pointing to the start of a deterioration in conditions.
“Businesses will be increasingly wary of their credit customers and their ability to pay going forward, even if no problems have arisen to this point,” she said. “Businesses in the growth phase, who require equity or debt for growth, may now see these lines of funding get increasingly more difficult to source.”
