PRINTERS URGED TO KEEP CREDIT SHORT

Print businesses are being urged to keep credit terms tight, with the forecast economic climate increasing the risk of business failure over almost all of the country.

Business-to-business payment defaults dipped in June, but surged in July, and are now up 42 per cent year-on-year. Court actions have surged to above pre-Covid levels, as creditors ramp up actions to collect outstanding debt. Actions dropped dramatically during the pandemic, but have now jumped as more businesses come under pressure, and debts owed to large creditors such as the ATO and financial institutions increase.

CreditorWatch’s July Business Risk Index (BRI) reveals 87.2 per cent of Australian regions will experience an increase in business failure rates over the next 12 months.

Queensland is forecast to see the highest rate of business failures, while Western Australia is predicted to see the biggest increase in the failure rate.

Regions in Western Sydney and South-East Queensland are expected to see the highest rates of business failure over the coming year. Many businesses in these regions continue to struggle in the high-interest rate environment. Households in suburbs surrounding these areas tend to be highly indebted, and on lower-than-average incomes, which means they are spending less in their local communities.

In contrast, the areas expected to experience the lowest business failure rates are typically located in regional parts of the country.

Notably, the average value of invoices held by businesses has dropped 51.5 per cent over the year to July 2024, reflecting a significant reduction in orders from suppliers due to declining consumer demand.

Food and Beverage Services tops the list for business failure rates at 8.3 per cent, followed by Arts & Recreation Services (5.8 per cent) and Administrative Support Services (5.6 per cent).

Regional areas continue to benefit from lower commercial rents, low competition among businesses, older populations and stronger local economies – particularly those areas where agriculture dominates. The agricultural sector is less impacted by high interest rates, as the goods produced are largely non-discretionary and demand for them increases broadly in line with population growth, which has been very strong.

On a state-by-state comparison, all states are forecast to experience an increase in the average failure rate. Queensland is expected to see the highest average rate of business failure over the next 12 months at 6.00 per cent, with Western Australia predicted to experience the largest average increase in business failures. Meanwhile, Tasmania has the lowest forecast average failure rate of 4.76 per cent.

CreditorWatch Chief Economist, Anneke Thompson, says consumer confidence is unlikely to trend upward for some time yet, impacting business, he said, “As long as households are spending less, and we know from retail trade data that spending per head of population has decreased for eight straight quarters, businesses will continue to battle high interest rates and continuing high input costs with falling demand.”