Firms avoiding closure, concerns ahead

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

 

Business confidence and conditions have slumped with half the population in lockdown and virus outbreaks occurring in several states, but so far that hasn’t resulted in a deluge of firms having to close their doors for good.

New figures show the number of business defaults, court actions and voluntary administrations all fell in July.

However, commercial credit bureau CreditorWatch warns given the impact current restrictions are likely to have, and the reduced stimulus and insolvency protections compared to 2020, it is expected these figures will deteriorate in the short term.

It is particularly concerned about the hospitality and accommodation sector and retailers.

“We are confronting increasingly challenging times from a strong starting point,” CreditorWatch CEO Patrick Coghlan said.

“This will hopefully allow the economy to return to growth when lockdowns and other restrictions end.”

Business defaults fell by 20 per cent in July compared to a month earlier, court cases declined by 38 per cent and firms going into administration were down six per cent.

The National Australia Bank monthly business survey released on Tuesday showed that in July confidence dropped by its second biggest margin since the 2008-09 global financial crisis.

Business conditions also suffered their third largest decline since the series began in 1997, beaten only by falls in the heat of last year recession.

Weak forward orders suggest these gloomy conditions will continue in the near-term, putting hiring and investment intentions at risk and fuelling expectations the economy will contract in the September quarter.

The weekly ANZ-Roy Morgan weekly gauge of consumer confidence also fell to its lowest level since November last year.

Against that backdrop, it will be surprising if the monthly Westpac-Melbourne Institute consumer sentiment survey manages a positive result for August when it is released on Wednesday.

In July, consumer sentiment managed a 1.5 per cent rise, but that came before NSW tightened its restrictions and extended the lockdown to the end of August, and other states endured snap lockdowns.

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