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Green shoots emerge but economy remains in uncharted waters
Australian small and medium-sized businesses are showing positive signs of stability, with defaults falling by 13 per cent for July, but this is not enough to allay concerns about the national economy, according to new research.
Green shoots emerge but economy remains in uncharted waters
Australian small and medium-sized businesses are showing positive signs of stability, with defaults falling by 13 per cent for July, but this is not enough to allay concerns about the national economy, according to new research.
Data collated by CreditorWatch showed that the average days for payments fell by 7.6 per cent across all sectors for the month of July.
“While at first glance a decrease in business administrations, defaults and payment times seems to indicate green shoots appearing in our economy, we should be cautious,” said CreditorWatch CEO Patrick Coghlan.
Despite payment times improving, they remain 224 per cent higher than July 2019 across all sectors. An 11.6 per cent fall in the number of business administrations in July has also been recorded.
Creditors and policymakers therefore need to prepare for a sharp market readjustment when government support ends.
“Until now, the priority has been to keep as many businesses as possible above water. The extension of JobKeeper measures to March 2021 and the mooted extension of Safe Harbour measures, including high limits on the amount of debt that SMEs can incur while still trading, will keep SMEs afloat. We may even see further falls in credit defaults and payment times, but it would be premature to call these green shoots,” Mr Coghlan noted.
The industries that showed the greatest fall in payment times were:
- Arts and recreation fell to 26 days overdue in July 2020 – down 34 days but still 160 per cent above July 2019
- Finance and insurance fell to 42 days overdue in July 2020 – down 33 days but still 500 per cent above July 2019
- Healthcare and social assistance fell to 34 days overdue in July 2020 – down 18 days from June but still 209 per cent above July 2019
- Construction fell to 41 days overdue in June 2020 – down one day from June but still up 241 per cent compared to July 2019.
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