Creditor Watch, the Australian credit reporting bureau, has released gloomy July results for its Business Risk Index (BRI) which show 87.2 per cent of regions around Australia will experience an increase in the failure rate of businesses over the next 12 months. 

While Western Sydney and South-East Queensland are expected to see the highest rates of business failure over the coming year, in what is good news for rural and regional areas, the regions expected to experience the lowest business failure rates over the next 12 months are typically in regional areas across the country. 

With a combination of lower commercial rents, lower competition among businesses, stronger local economies and older populations and areas where agriculture is the dominant market, this 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 strong. 

With money being tight for most at the moment, a rise in tourism has seen Aussies look for cheaper ways to travel locally, which in turn is giving rural areas a much-needed boost.  

Nyngan’s Emily Stanton along with husband James run several businesses in Nyngan, including some which rely on tourists and travellers.

The pair say business is hard work and you need to be one step ahead to keep moving forward. 

“Business is booming at the moment with the excitement of opening our new venue in Nyngan,” said Mrs Stanton. 

“We have also had a lot of travellers heading west for Ag Expo, Mundi Mundi Bash, Louth Races, rally car events and the Big Boar Bonanza. August has been a big month across all of our businesses.” 

She recommended people should continue to support local business by: 

• shopping at local stores 
• sharing on social media 
• leaving positive reviews 
• recommending to friends. 

PHOTO: Creditor Watch CEO, Patrick Coghlan photo courtesy Linkedin 

Creditor Watch CEO, Patrick Coghlan, says the data shows how tough businesses around Australia are doing right now. 

“The fact that almost 90 per cent of regions will see an increase in the rate of business failures indicates that the current pressures from interest rates, cost increases and declining consumer demand are being acutely felt right around the country – particularly those areas with younger populations and a higher proportion of businesses in high-risk sectors,” he says. 

“Our hope is that the Stage 3 tax cuts will continue to boost consumer confidence to some extent, but we don’t expect a significant improvement in conditions for businesses until the impacts of one or two rate cuts are felt by households.” 

Tom Shanahan of the Tronic Group in Cobar says he is happy with how his business is going at the moment and is more busier than ever. 

"Business is flat out at the moment which is great for us and for rural Australia. Unfortunately the government under invests in rural businesses and undervalues the strengths we have to offer.

"Business people work so hard out here with sometimes limited resources, so I feel lucky to be able to keep employing people and putting money back into our local community." 

CreditorWatch Chief Economist, Anneke Thompson, says consumer confidence is unlikely to trend upward for some time yet. 

PHOTO: Creditor Watch Chief Economist, Anneke Thompson 

“Consumer confidence is still incredibly low, even though consumers reported to Westpac in its August survey that confidence was slightly up,” she says. 

“While consumers are now less fearful of an increase in interest rates, and also report a small positive sentiment increase from tax cuts, the increase in confidence is not nearly enough to suggest that household consumption will recover any time soon. 

“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.” 

The value of invoices has decreased by 51.5 per cent over the year with consumer demand falling businesses are therefore ordering less.  

With creditors now more than ever taking action to collect outstanding debts, court cases have grown to high levels as more businesses come under the pump from large creditors such as the ATO and financial institutions. 

Food & beverage services is the top ranked industry business failure rate at 8.3 per cent (and is also the leading industry for outstanding ATO tax debts above $100,000, with a rate of 1.67 per cent). It is followed by arts & recreation services (5.8 per cent) and administrative support services (5.6 per cent).

Insolvencies in the education & training sector increased 88 per cent in the year to July 2024. 

“We maintain that the operating environment for businesses in Australia will remain very challenging until at least the first quarter of 2025, at which point the RBA is likely to have cut the cash rate or will be very close to cutting it. As our data suggests, the pain felt by businesses will not be spread evenly across the country, as high interest rates have an outsized impact on areas with younger populations and a high proportion of businesses in the construction or discretionary retail spend sectors,” according to the Report.