Business-to-business payment defaults have continued to climb. Among tax debt default records, where more than $100,000 is owed by a business, almost 24 per cent of affected firms are in the construction sector followed by 12.5 per cent in professional, scientific and technical services.
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Suburban Sydney is the worst-hit area of the country. The expected default rate is highest in the Merrylands-Guildford area at 7.8 per cent, closely followed by the Bringelly-Green Valley area at 7.75 per cent.
Ormaeu, Surfers Paradise and Broadbeach in Queensland are also among the areas where businesses are struggling with expected default rates above 7 per cent.
CreditorWatch chief economist Anneke Thompson said it was clear many small businesses were struggling.
“Of particular concern is the continued high level of trade payment defaults which, coupled with the ATO now lodging defaults for tax debts outstanding of $100,000 or more at increasing rates, means that more and more businesses are unable to meet their supplier payments on time,” she says.
“This has a ripple effect on business-to-business trade, and we expect these trade payment defaults to continue to increase while interest rates remain elevated.”
Economic growth has slowed to its lowest rate, outside of the pandemic recession, in almost 30 years as consumers struggle with high interest rates, high inflation and a growing tax take.
The IMF, in its annual world economic outlook, expects the Australian economy to expand by 1.5 per cent this year before improving to 2 per cent in 2025. While inflation is forecast to edge down to 3 per cent next year, unemployment is tipped to increase from around 3.7 per cent to 4.5 per cent.
Growth in China, Australia’s largest trading partner, is forecast to slow from 5.3 per cent in 2023 to 4.1 per cent next year.
The fund’s chief economist, Pierre-Olivier Gourinchas, said despite the way the global economy had recovered from the pandemic, longer-term prospects “remain historically weak”.
He said low productivity growth was behind the poor outlook.
“Much hope rests on artificial intelligence delivering strong productivity gains in the medium
term. It may do so, but the potential for serious disruptions in labor and financial markets is high,” he said.
“Harnessing the potential of AI for all will require that countries improve their digital infrastructure, invest in human capital, and coordinate on global rules of the road.”
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Treasurer Jim Chalmers, who will head to Washington for a round of IMF and World Bank meetings on Wednesday, said the challenges facing the global economy were growing.
“While global inflation remains a key concern, the balance of risks is shifting from inflation to growth – and the concerns about the outlook for the Chinese economy and increased tensions in the Middle East are adding to uncertainty,” he said.
“These evolving global conditions make it an important time to engage with my counterparts and international institutions as we put the final touches on the May budget.”
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