Defaults on payments between businesses surged last month, as slowing household spending and the prospect of further interest rate hikes generates fears of mass insolvencies.
Wednesday's Index report showed payment defaults rose 52 per cent year-on-year, eclipsing its previous high point from March 2019, while the number of external administrators also climbed 13 per cent over the same period.
For those reasons, CreditorWatch is now predicting the national default rate to increase from 4.71 per cent to 5.76 per cent over the next 12 months, with businesses in hospitality most at risk. "The impact of the rate rises, as well as high inflation, is increasingly being felt by businesses as consumers tighten their belts.
They suggested this was likely due to households recognising further interest rate rises were on the horizon, despite the Reserve Bank electing to hold rates steady this month. "The RBA has succeeded in slowing consumer spending for goods and reducing inflation in this area, however, consumers alone can't bring down inflation."For this reason, the RBA will be closely monitoring job vacancy and labour force data for signs that their policy intervention is flowing through to the business side.
Retailers, another sector closely tied to consumer spending, are also at risk, with data from the Australian Bureau of Statistics on Tuesday showing spending on clothing and footwear down 3.4 per cent year-on-year in May. Picture: Australian Bureau of StatisticsKPMG restructuring partner
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