Perth tipped to have second-lowest rate of businesses going bust over the next year, says CreditorWatch

Perth is tipped to have the second-lowest rate of business failures among the capital cities over the next 12 months, as new figures from credit analysts CreditorWatch hint at a brighter outlook. Adelaide leads the pack, with the city expected to have the lowest rate of businesses going bust over the next year, at 5.15 per cent. It was followed by Perth with a forecast failure rate of 5.2 per cent, then Melbourne (5.81 per cent), Brisbane (5.83 per cent), and Sydney (6.2 per cent). Fresh data from CreditorWatch, to be released on Wednesday, also showed an easing in two key measures of business stress in May. Insolvencies have stabilised to be down 0.9 per cent from April to May, and have now dropped 12 per cent from their peak in November. Meanwhile, business-to-business payment defaults dipped 11.8 per cent in May and were down 18.3 per cent from their December peak. CreditorWatch said the drops suggested the stage three tax cuts — which came into effect last July — as well as the recent interest rate cuts from the Reserve Bank of Australia, slowing inflation and fiscal support measures were beginning to alleviate some pressures on Australian businesses. But CreditorWatch chief executive Patrick Coghlan warned some sectors remained under pressure, with rising insolvencies being recorded in healthcare and social assistance, retail, transportation, hiring and real estate. Easing insolvency trends were evident in hospitality and construction, which were previously the most challenged sectors. “Post-COVID, we’ve seen inflation hit 30-year highs. Those rapid price increases across the economy don’t reverse when the inflation rate comes down again,” Mr Coghlan said, adding higher prices were locked in and remained as permanent pressures for businesses. “(Higher prices are) generally passed on to consumers, but this is very difficult for businesses in sectors such as hospitality. “We won’t see conditions improve sustainably for businesses in discretionary sectors until consumers see their wages grow ahead of costs for some time.” CreditorWatch chief economist Ivan Colhoun said the Fair Work Commission’s decision to give the country’s lowest paid workers a pay bump of 3.5 per cent from $24.10 to $24.94 per hour would benefit consumers, but applied further pressure on businesses — particularly those in the retail and hospitality sectors. “The good thing is that we will likely see these funds recycled into the economy,” he said. “Interest rate relief by the RBA, as inflation has moderated, should also improve cash flow a little for both consumers and businesses alike.” Gosnells in Perth’s south-east is expected to have the highest rate of business failures in WA over the next year, with 7.2 per cent of businesses in the suburb predicted to close down. It was followed by Rockingham with a default rate of about 7 per cent. WA Insolvency Solutions last week warned the State looked set for a surge in business collapses as the Australian Taxation Office clamps down on ageing debts.