External administrator appointments were above their pre-COVID levels, while court actions for business debts were at their highest rate since April 2020. The average value of business invoices was down 19 per cent over the year, in a sign of the subdued retail environment.
Western Sydney is the area at the highest risk of business failure, according to CreditorWatch, including the suburbs of Merrylands, Green Valley and Canterbury. South-east Queensland was also at risk.
CreditorWatch chief executive Patrick Coghlan said the coming year would be extremely challenging for businesses.
“The retail trade numbers for December clearly showed that interest rate increases and high inflation are now exerting a huge amount of pressure on households, which translate to lower demand for goods and services,” he said.
“Our hope is that interest rate relief arrives sooner rather than later to ease cost-of-living pressures and stimulate demand.”
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One of the largest cost-of-living pressures, which has forced the Reserve Bank to lift official interest rates, has been inflation, which peaked at 7.8 per cent in late 2022. It has now fallen to 4.1 per cent but remains well above the RBA’s 2-3 per target band.
Marion Kohler, the head of the Reserve’s economic analysis department, on Tuesday told the Australian Business Economists’ annual forecasting conference that while the strong lift in inflation for goods was likely to halt, it was a different story for services.
“Firms in our liaison program continue to say that they face pressure from higher labour and non-labour costs like professional services, logistics and insurance,” Kohler said.
“We are forecasting that services inflation will decline from here, but only gradually, as demand moves into better balance with supply and domestic cost pressures moderate.
“This decline in services price inflation is necessary for the inflation target to be achieved over time.”
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