Business activity recovers to pre-COVID levels

April 18, 2023 05:06 PM AEST | By AAPNEWS

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Business activity recovers to pre-COVID levels — Image source: AAPNEWS

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Australian businesses have so far proven resilient to high inflation and interest rates, with business activity returning to pre-COVID levels.

CreditorWatch's monthly business risk report shows several indicators of business activity rebounding to pre-pandemic levels despite mounting challenges.

Business-to-business trade receivables, the average value of invoices, lifted 45 per cent year over the year to March.

This was partly driven by inflation but also by the return to normal trading conditions after the pandemic disruptions.

Another indicator of business activity, credit inquiries, lifted a massive 149 per cent in the year to March.

CreditorWatch chief economist Anneke Thompson said the lift in trade receivables and other business activity indicators could be explained by the high workloads felt by many industries.

The construction industry, for example, is still working through high volumes of work and invoicing at a high rate.

"It is the cost side that is really damaging to this sector at the moment, with many projects being completed at a substantial financial loss to the builder due to the price the owner pays being fixed at the time of contract signing," Ms Thompson explained.

Insolvencies are also on the rise, with external administrations up 35 per cent over the year.

Business-to-business trade payment defaults lifted 20 per cent in the year to March, and court actions increased 22 per cent over the year.

Despite the index revealing ongoing resilience in the business sector, challenges are expected to start compounding as demand drops and the cost of doing business remains high.

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