Equifax Quarterly Commercial Insights: March 2023
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Overall business credit applications reduced by -3.8% (vs March quarter 2023)
- Business loan applications decreased by -4.1% (vs March quarter 2023)
- Trade credit applications fell by -1.6% (vs March quarter 2023)
- Asset finance applications declined by -4.1% (vs March quarter 2023)
SYDNEY – May 2023 – The long-anticipated insolvency backlog ‘tsunami’ may finally be coming to shore, according to new data and analysis from Equifax.
Insolvency rates at the total market level increased by 74% in Q1 2023 compared to the same period in 2022, driven by high levels of insolvency in the construction and accommodation sectors. Meanwhile, business credit demand decreased -3.8% year-on-year in the March quarter, with commercial enquiry volumes falling across all product types.
The data has been released today by Equifax, the leading provider of credit information and analysis in Australia and New Zealand, in line with the Equifax Quarterly Commercial Insights - March 2023. The Insights report includes Business Credit Demand Index data, which measures the volume of credit applications for trade credit, business loans and asset finance.
Construction insolvencies continue to increase, up 94% in Q1 2023 compared to the same period 2022. Insolvencies in the Accommodation and Food Services industry also remain high, with this sector experiencing the second greatest proportion of insolvencies versus active entities (following the mining sector).
Scott Mason, General Manager Commercial and Property Services, Equifax, said: “After several quarters of increasing insolvencies, we are now seeing insolvency levels return to - and even surpass - pre-Covid numbers. In Q1 2023, there were 148 more insolvencies than in Q1 2020.”
Commercial credit demand fell across all product types in the March quarter. According to Equifax, demand for trade credit (-1.6%) declined the least in Q1, followed by asset finance (-4.1%) and business loan applications (-4.1%).
Additionally, average days beyond terms data continues to increase, up 11% in Q1 2023 versus the prior quarter, and up by 0.8 days on the same quarter 2022.
“As economic conditions tighten, we are seeing more businesses ‘shopping around’ for better credit deals. This resurgence in shopping behaviour follows a brief period of decline in 2022, and has increased in line with RBA’s cash rate hikes. This suggests that businesses are feeling the pinch and refinancing or seeking new lines of credit at the lowest possible rate to help them weather economic challenges.
“This behaviour, along with muted business demand, growing arrears and rising insolvency, are clear warning signs indicating more turbulence to come for the Australian market,” Mr Mason said.
Business credit demand March 2023 vs March 2022:
Overall business credit applications declined by -3.8% in the March quarter 2023. SA (+1%) recorded a marginal increase and TAS was flat (0%) in Q1, while all other states saw declines. NSW (-9%), and NT (-8%)* saw the largest declines, followed by WA (-4%), ACT (-2%), VIC (-1%) and QLD (-1%).
Business loan applications decreased -4.1% in Q1, with mixed performances across the states. TAS (+4%), SA(+3%), ACT (+3%) and QLD (+1%) saw business loan demand increase in Q1, while NSW (-12%), NT (-7%)* WA (-2%), and VIC (-1%) saw declines.
Trade credit applications were lower in Q1 2023 (-1.6%). Positive demand was recorded in SA (+3%), while VIC (0%) was flat. NT (-18%)* saw the largest decline followed by TAS (-12%), ACT (-7%), QLD (-3%), WA (-2%) and NSW (-1%).
Asset finance applications were down -4.1% year-on-year in the March quarter. NT (+2%)* saw growth in demand while TAS (0%) was flat. All other states saw a decline in demand, led by ACT (-13%). WA (-9%), SA (-7%), QLD (-5%), NSW (-3%), and VIC (-3%) also experienced falling demand.
*Low volumes
IMAGE 1: Equifax Commercial Credit Demand Index – March 2023 Quarter
IMAGE 2: Equifax Commercial Credit Demand Index by categories of credit – March 2023 Quarter
IMAGE 3: Business Loan Applications State Overview, 2023 Q1
IMAGE 4: Asset Finance Applications State Overview, 2023 Q1
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NOTE TO EDITORS
The Equifax Quarterly Commercial Insights (formerly Business Credit Demand Index) measures the volume of credit applications that go through the Equifax Commercial Bureau by financial services credit providers in Australia. Based on this, it is considered to be a good measure of intentions to acquire credit by businesses. This differs from other market measures published by the RBA/ABS, which measure new and cumulative dollar amounts that are actually approved by financial institutions.
DISCLAIMER
Purpose of Equifax media releases:
The information in this release does not constitute legal, accounting or other professional financial advice. The information may change, and Equifax does not guarantee its currency or accuracy. To the extent permitted by law, Equifax specifically excludes all liability or responsibility for any loss or damage arising out of reliance on information in this release and the data in this report, including any consequential or indirect loss, loss of profit, loss of revenue or loss of business opportunity.
