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Almost 90% of Australia’s regions are likely to see an increase in business failures over the next 12 months, according to CreditorWatch’s latest Business Risk Index.
July data forecasts that failure rates will be highest in Western Sydney and South-East Queensland as businesses struggle in the high interest rate environment. Commercial property prices and rents are also relatively high in these locations.
Furthermore, households in surrounding suburbs tend to be highly indebted and on lower-than-average incomes, so are spending less in their local communities.
Meanwhile, businesses in regional locations are expected to experience the lowest failure rates. They benefit from lower commercial rents, less competition and stronger local economies.
CreditorWatch CEO Patrick Coghlan says pressures from interest rates, cost increases and declining consumer demand are being acutely felt around the country.
“Our hope is that the Stage 3 tax cuts will continue to boost consumer confidence to some extent, but we don’t expect a significant improvement in conditions for businesses until the impacts of one or two rate cuts are felt by households," he says.
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