While Australia’s economic outlook post-JobKeeper has shifted to optimistic territory, businesses continue to show signs of slowing cash flow, as the number of industries reporting deteriorating payment times has doubled since the wage subsidy’s withdrawal.
CreditorWatch on Tuesday released the results of its Business Risk Review which show that 17 of the 19 industry groups covered reported longer payment times in April.
“It is concerning... that twice as many industries reported a deterioration in payment times versus last month,” said Patrick Coghlan, CEO of CreditorWatch. “This is to be expected following the withdrawal of JobKeeper — the federal government’s main economic stimulus measure.”
Mr Coghlan said that while the forecast economic impacts of JobKeeper’s withdrawal have shifted to reflect an optimistic outlook for employment and business conditions, the impacts of the wage subsidy’s expiry won’t become clear until later this year.
The RBA on Friday released its quarterly monetary policy update which suggested employment growth is expected to see continued growth over the next few months, even in the wake of JobKeeper’s end, which many expected to destabalise Australia’s COVID recovery.
The central bank expects the impacts of JobKeeper’s expiry will have only a “muted effect” on Australian employment figures through 2021.
“But we won’t really be able to get a true read on economic conditions until the June and September quarters,” Mr Coghlan said, “when businesses will have had time to stand on their own feet for a period without government support.”
According to the report, there was a marked increase in delayed payment times across the construction, administrative and support services, and healthcare and social assistance industries in April 2021, compared to the same period last year.
The report identified serious concerns for payment times in eight industries including healthcare and social administration; construction; administrative and support services; professional, scientific and technical services; wholesale trade; rental, hiring and real estate services; education and training; and the mining industry.
Meanwhile, credit enquiries are up, and defaults have fallen to a level unseen since before the pandemic took hold in March last year.
“The good news is there is still a healthy pipeline of credit enquiries,” Mr Coghlan said. “Defaults are below where they were a year ago at the peak of Australia’s pandemic crisis and external administrations are trending down again.”
Across the board, defaults have fallen by 47 per cent over the three months to April 2021, compared to the same period last year.
“The sting is defaults rose by 18 per cent in the three months to April 2021 compared to the three months to January 2021,” said Harley Dale, chief economist at CreditorWatch.
“We are certainly seeing mixed results for defaults and will have a watchful eye on these figures for the June 2021 quarter. These results will be far more telling in terms of how businesses are really performing.”
For April, the sectors showing the highest likelihood of defaulting included the accommodation and food services industry, at 5.89 per cent; transport, postal and warehousing, at 5.14 per cent; and the public administration and safety sector, at 4.86 per cent.
Those with the lowest probability of defaulting were the healthcare and social assistance sector, at 2.12 per cent; arts and recreational services, at 2.76 per cent; and the agriculture, forestry and fishing industries, at 3.07 per cent.
“It’s important to remember, the April Business Risk Review data represents only one month. We need to wait until we have at least two more months’ data to identify any real trends,” Mr Dale said.
“In the interim, it’s expected the federal government will announce targeted stimulus measures in the federal budget to assist sectors that have been severely affected by the pandemic. This will also flow through to future payments data.”
The report also shows a fall in the rate of external administrations, down by 34 per cent over the three months to April, compared to the same period last year. External administrations were down by 18 per cent for the month of April.
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