Late payments by Australian businesses rose to their highest rate in six years in April, with invoices more than 60 days overdue reaching their highest level since January 2020, according to CreditorWatch.
The credit reporting company said the data pointed to mounting cash-flow strain across the economy as businesses absorb higher borrowing costs, rising energy and transport expenses, and weak consumer demand.
Payment behaviour was worsening before any broader collapse in business conditions had become visible in official data, CreditorWatch said. It argued this pointed to deeper financial weakness rather than a routine slowdown in the economic cycle.
The deterioration reflects a three-way squeeze on businesses: higher interest rates have increased debt-servicing costs, inflation and energy prices have lifted operating expenses, and softer demand has reduced the ability to pass those costs on to customers.
The Reserve Bank of Australia raised the cash rate target by 25 basis points to 4.35 per cent, according to data cited by CreditorWatch. Higher fuel prices were also contributing to inflation and weighing on household and business spending, it said.
That combination has made conditions more difficult for smaller businesses and for sectors operating on thin margins. The pressure is now showing up in invoice ledgers, credit enquiries and business-to-business payment defaults, CreditorWatch said.
Patrick Coghlan, chief executive of CreditorWatch, said the trend had moved beyond broad economic pressure and was now visible in day-to-day trading data. "The April data shows the business risk story has moved from macro pressure to measurable cash-flow behaviour. We are not seeing a sudden collapse in business conditions, but we are seeing a less forgiving trading environment. More invoices are sliding beyond 60 days overdue, and the stress is concentrated in sectors central to household spending, supply chains and small business employment. Businesses extending credit should be watching customers more closely, acting earlier and using live risk signals rather than waiting for problems to become visible in arrears or payment defaults," Coghlan said.
Sector strain
The sharpest signs of stress were concentrated in sectors exposed to discretionary spending, labour costs, fuel bills and supply-chain disruption. Food and Beverage Services recorded the highest rolling annual insolvency rate at 2.24 per cent, followed by Administrative and Support Services at 1.25 per cent, Transport, Postal and Warehousing at 1.24 per cent, Construction at 1.18 per cent and Manufacturing at 1.13 per cent.
Late payments showed a similar pattern. Food and Beverage Services had the highest share of invoices more than 60 days overdue at 11.37 per cent, followed by Electricity, Gas, Water and Waste Services at 8.16 per cent, Rental, Hiring and Real Estate Services at 7.51 per cent, Construction at 7.15 per cent, Transport, Postal and Warehousing at 7.09 per cent and Retail Trade at 6.59 per cent.
The largest increases in payment defaults were recorded in retail, hospitality, wholesale trade, transport, and finance and insurance services, according to CreditorWatch. It said those industries were more exposed to interest rates and energy costs than many other parts of the economy.
Tax debt pressure
Separate company data showed more businesses were also falling behind on tax payments. CreditorWatch said three of the four highest monthly inflows of new tax debt defaults since post-pandemic enforcement resumed had occurred in the past four months.
The burden appeared concentrated among smaller businesses. Sole traders accounted for 54 per cent of outstanding tax debt defaults of more than AUD $100,000, according to CreditorWatch.
Businesses carrying large tax debts faced a higher risk of insolvency over the coming 12 months, the company said. It also pointed to a reported 21 per cent rise in calls to the Small Business Debt Helpline over the year to the end of 2025 as a sign that financial pressure on small operators was intensifying.
External shock
The conflict in the Middle East was adding to domestic business stress by keeping fuel and broader energy costs elevated, CreditorWatch said. It said the Strait of Hormuz remained effectively closed and oil prices were trading around US$100 per barrel, despite falling back from recent peaks.
The company noted that temporary cuts to fuel excise tax and road user charges had softened the rise in petrol and diesel prices in Australia. Without those measures, prices would be more than 30 cents per litre higher, it said.
Ivan Colhoun, chief economist at CreditorWatch, said official economic data had so far shown only a modest weakening in conditions, but confidence and input costs had taken a larger hit. "The surge in input costs and retail prices add to prior cost of living and cost of doing business pressures and can be expected to lead to weaker business conditions in coming months unless the Strait of Hormuz reopens relatively soon. The third successive interest rate increase by the RBA to address Australia's pre-existing above-target inflation will add additional pressure to businesses and consumers in coming months," Colhoun said.
He said the company's own indicators suggested concern was already rising ahead of slower-moving official measures. Credit enquiries had increased modestly, while the number and value of invoice defaults had also risen.
Colhoun later said uncertainty over energy prices was making planning harder for businesses already dealing with higher borrowing costs. "This is evident in the recent sharp drop in CreditorWatch's Economic Conditions Tracker. Higher energy costs are a significant part of the deterioration in the indicator. These prices could reverse relatively quickly if a peace agreement is signed soon, but by the same token, energy prices might rise sharply further were the Strait of Hormuz to remain closed for an extended period. This uncertainty is of course very difficult for businesses. Encouragingly, the outlook for the Australian economy seemed to be improving ahead of the Iran conflict, though recent interest rate rises will no doubt be a headwind across the second half of the year. If an agreement to reopen the Strait can be reached soon, there is a reasonable prospect that these more favourable economic conditions can be re-established. Parts of the mining sector are performing strongly and the WA economy seems to be benefiting from the continuing AI investment boom and global data centre rollout," Colhoun said.