Equifax Quarterly Commercial Insights: June 2023
- Overall business credit applications reduced by -1.3% (vs June quarter 2022)
- Business loan applications decreased by -4.0% (vs June quarter 2022)
- Trade credit applications fell by -2.1% (vs June quarter 2022)
- Asset finance applications increased by +7.8% (vs June quarter 2022)
SYDNEY – 1 August 2023 – Commercial credit demand fell in Q2 2023, while insolvency levels rose +8% above pre-Covid levels (2019) according to the latest data from Equifax, the leading provider of credit information and analysis in Australia and New Zealand.
According to the Equifax Quarterly Commercial Insights - June 2023, overall business credit demand declined by -1.3% in Q2 2023. Demand for trade credit (-2.1%) and business loan applications (-4.0%) fell in Q2 2023 versus the same period last year, while asset finance applications rose +7.8%.
Insolvency rates at the total market level increased by +45% in Q2 2023 vs the same period in 2022, and up +75% vs same period 2 years ago. May 2023 had the highest reported insolvencies in the past 12 months (866 entities).
Scott Mason, General Manager Commercial and Property Services, Equifax, said: “We are increasingly seeing signs of stress on Australian businesses. This is evident not only in our commercial data, but also when we look at the people behind the business.
“According to our data, sole traders and SMB owners across all sectors are seeing an increase in early stage (30+ days) mortgage arrears rate - with operators in the construction sector hardest hit. In Q2 2023, Sole Traders in the Construction sector are 60% more likely to have 30+ arrears vs. the average consumer with no commercial relationships, while their counterparts in other sectors in comparison are 40% more likely.
“Even more concerning, late stage (90+ days) mortgage arrears are also climbing, with SMBs in construction +13% more likely to be in late stage arrears vs 12 months ago. This suggests that these operators are putting money into the running of the business and not paying themselves what they previously would - and as a result, their mortgage payments are starting to lapse.”
The increased levels of operating costs due to inflation, tighter borrowing conditions from lenders and shrinking levels of discretionary spend by consumers has had an impact on commercial trade payments over the last 2 quarters - another sign of stress among pockets of the Australian business community.
The construction sector is the most impacted out of the major industry sectors, with average days beyond term increasing to 7.4 days in Q2 2023. The Accommodation & Food Services and Healthcare industries have also seen their average number of days beyond terms increase in 2023, after a period of decline in late 2022.
Business credit demand June 2023 vs June 2022:
Overall business credit applications reduced marginally (-1.3%) in the June quarter 2023 due to mixed demand across the states. WA (+7%), TAS (+7%), SA (+6%) and QLD (+5%) saw increases in business credit applications, while VIC (-2%), NSW (-7%) and ACT (-13%) experienced declines.
Business loan applications decreased -4.0% in Q2. Demand fell in ACT (-20%), NSW (-10%) and VIC (-7%), while TAS (+12%), WA (+7%), SA (+6%) and QLD (+4%) saw business loan demand increase in Q1.
Trade credit applications were soft in Q2 2023 (-2%) with most states recording a marginal decline. There was no change in demand in VIC (0%), QLD (0%) and WA (0%). TAS (-7%) saw the largest decline followed by NSW (-5%), ACT (-2%) and SA (-1%).
Asset finance was the only commercial product type that reported an increase year-on-year in the June quarter. WA (+15%) and VIC (+11%) experienced the biggest increases in demand, followed by QLD (+9%), SA (+8%), NSW (+3%), TAS (+2%) and ACT (+1%).
IMAGE 1: Equifax Commercial Credit Demand Index – June 2023 Quarter
IMAGE 2: Equifax Commercial Credit Demand Index by categories of credit – June 2023 Quarter
IMAGE 3: Business Loan Applications State Overview, 2023 Q2
IMAGE 4: Asset Finance Applications State Overview, 2023 Q2
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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.
