Businesses are struggling to pay their bills, with late payments at their highest level in more than three years.
The latest CreditorWatch Business Risk Index (BRI) report showed late payments on outstanding invoices were at their highest rate since the end of JobKeeper in March 2021.
CrditorWatch Chief Economist Ivan Colhoun said rising arrears reflected a combination of more challenging business conditions from impacts such as higher interest rates and higher costs of living and doing business.
Mr Colhoun said there had also been decreases in discretionary spending and activity and demand, especially in interest-rate sensitive sectors.
“This continues to be particularly noticeable (in) the Construction and Food and Beverage Services sectors,” he said.
Mr Colhoun said the proportion of payments in arrears remained below that experienced in the pre-COVID period.
He said that was a relatively soft period for economic growth in the Australian economy in the aftermath of the Banking Royal Commission, when the banks tightened lending standards.
“This suggests a softer economy at the present time, but not an especially weak economy, overall, albeit with some significant variations in conditions by sector.”
Mr Colhoun said the information, media and telecommunications sector was currently experiencing the highest rate of late payment among all industries, recording a rate of 5.9 percent for September, followed by electricity, gas, water and waste services (5.7 percent) and financial and insurance services (5.2 percent).
He said the construction and hospitality sectors currently had the highest rates of payment defaults, at 1.77 percent and 1.67 percent respectively.
CreditorWatch CEO Patrick Coghlan said deteriorating B2B payment times and the upward trend in payment defaults indicated that many businesses were still under considerable cash flow pressure.
“Ongoing economic impacts such as weaker consumer demand are clearly bringing more pressure to bear on Australian businesses,” Mr Coghlan said.
“The fact that the construction and hospitality sectors have the highest rates of payment defaults and construction has the highest rates of arrears, mirrors the latest ABS data showing declining building approvals and flat spending in cafes and restaurants across much of 2024.”
