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Business Risk Review – July 2021

Trade payments data healthy… but for how long?

The stats that matter – Comparing July’s Business Risk Review 2021 to June 2021

  • Payment defaults down 20%
  • Credit enquiries up 12.5%
  • Court actions were down 20% month on month. *not seasonally adjusted*
  • External administrations down almost 23%

The July 2021 CreditorWatch Business Risk Review is a reflection of the ups and downs playing out in the economy through the COVID period. Leading credit risk indicators paint a positive view across Australia with businesses in a good position to face the challenges of the current lockdowns.

We are confronting increasingly challenging times from a strong starting point,” said CreditorWatch CEO Patrick Coghlan.

“This will hopefully allow the economy to return to growth when lockdowns and other restrictions end,” he said.

Read the media release

Defaults drop compared to June

The number of defaults fell by 20 per cent in July 2021 compared to June, although this data is not seasonally adjusted. This is an encouraging result after the number of defaults rose in May and June, with defaults rising by five per cent over the three months to July 2021.

Defaults are a leading indicator of economic conditions. It will be important to closely watch these figures in coming months given the escalating COVID crisis,” said CreditorWatch Chief Economist Harley Dale.

“We expect the Australian economy to contract in the September 2021 quarter, before returning to growth once vaccination rates rise and the economy opens up,” he added.

Credit enquiries buoyant

In non-seasonally adjusted terms, credit enquiries jumped by 12.5 per cent in July 2021. A clear upward trend has been in place since the beginning of 2021. It is an encouraging start to the 2021/22 financial year.

Court cases continue to fall

The number of court cases continues to trend down, with numbers dropping since March 2020.

On an annual basis, the number of court cases fell by 38 per cent in July 2021, the 16th month of consecutive decline. Over the three months to July this year, courts cases were down by 31 per cent compared to the equivalent period last year.

External administrations down

The number of external administrations fell by nearly 6 per cent in July 2021, although this number is not seasonally adjusted.

Administrations were up by 15 per cent over the three months to July 2021, compared to the three months to April 2021. The fall in the month of July this year was a good result, but there is a high risk this trend won’t be sustained given current COVID challenges. If we look at a 12-month moving average, external administrations through to July 2021 are 41 per cent lower than the peak in December 2019.

Outlook

With risks from COVID lockdowns escalating, it is expected most measures on which the Business Risk Review reports will remain flat before deteriorating after lockdowns and when vaccination rates rise.