Food and beverage sector hit hardest by economic slowdown
The economic slowdown continues to hit the food and beverage sector the hardest.
According to CreditorWatch’s latest Business Risk Index (BRI), the failure rate for Australian businesses is currently an average of 4.95 per cent – an increase of 17.3 per cent since January.
The credit reporting bureau has forecast the rate will continue to increase and will reach 5.2 per cent over the next 12 months.
Businesses are feeling the brunt of low levels of consumer spending, high inflation and interest rate increases.
Thursday’s labour force survey will provide further insight into the direction of the Australian economy over the next few months.
“One of the biggest contributing factors to this increase in our business failure rate is the lack of consumer demand,” CreditorWatch chief executive Patrick Coghlan.
“This is reflected in the ABS household spending and Westpac Consumer Sentiment numbers.
“Consumers won’t be inclined to open their wallets in any significant way until they get a reduction in their mortgage payments. A couple of rate cuts would also mean that credit becomes more affordable for businesses, and they are able to get back on the growth track as well.”
CreditorWatch business payment default data has increased 68.1 per cent in the past year. It is now at record levels with a growing number of businesses unable to pay their invoices from suppliers.
Worryingly, CreditorWatch has identified that one default has a 28 per cent likelihood of closing within the next 12 months. Four or more defaults and there is a 74 per cent chance of collapse.
Food and beverage venues are at most risk, showing a rate of 8.2 per cent for August – or one of every 12 business failing.
The food and beverage sector is battling rising costs, dwindling demand and an aggressive ATO. The sector is leading the leading industry for outstanding ATO tax debts above $100,000, with a rate of 1.73 per cent.
“Our data, consistently and for some time now, indicates that Australian businesses are operating under extremely challenging conditions – particularly those in the food and beverage, arts and recreation, retail trade and construction sectors,” CreditorWatch chief economist Anneke Thompson said.
“Under these circumstances, it is almost certain that unemployment will continue to rise – the question is by how much? We don’t expect businesses to feel more confident until there have been at least two or three cuts to the cash rate. Unfortunately, this means it is likely things will get worse before they get better.”
Jonathan Jackson, 18th September 2024
