According to the CreditorWatch Business Risk Index (BRI), which helps guide businesses when making future growth plans, Melbourne City is the most improved CBD area over the past 12 months, with a six-point move up the business risk index to 32.8.

The Central Melbourne area, which houses 159 050 people within an area of 31.00 square kilometres is benefiting from improved foot traffic during non-working hours, with Sundays now busier in Melbourne than Mondays.

What’s ensuring night-time activity remains robust, adds the latest CreditorWatch update is the influx of international students and the return of sporting events to the MCG/Melbourne Park.

By comparison, Sydney Inner City is the least improved CBD area – having shed 4.8 points to be the worst-performing capital on the index at 24.1.

Due to rental costs, which are much higher than in other capital city CBD areas, Sydney Inner City is the only CBD area to fall down the rankings on the BRI.

According to CreditorWatch data, the Sydney CBD also has considerably less night-time activity than many other Australian capital city CBDs, which in turn makes CBD businesses considerably more reliant on office workers for business trade.

Overall, the worst-performing region in Australia on a yearly basis is Gosford in NSW, which shed around 22 BRI points.

Best regions and capital cities (5,000+ businesses)

Highs and lows

Characterised by below-average property and rent prices and above-average incomes, the list of best-performing regions is a real potpourri of areas with Victoria, inner-city Adelaide and North Qld comprising most of the top 10.

Across regions with more than 5,000 businesses, Ballarat in Victoria was identified as the region with the lowest risk of business failure, followed by Unley and Norwood-Payneham-St Peters in South Australia.

By comparison, the regions with the highest risk of business failure are around Western Sydney and South-East Queensland, with Merrylands-Guildford (NSW) the top-ranked region, followed by Canterbury (NSW) and Bankstown (NSW).

These regions are considered particularly sensitive to interest rate changes, especially given the relatively high levels of debt among both businesses and households and lower-than-average incomes.

Overall, the worst-performing region in Australia on a yearly basis is Gosford in NSW, which shed around 22 BRI points.

On a yearly basis, the most improved region is Melville in Perth, which has moved 15 points up the BRI, followed by Brunswick-Coburg in inner-city Melbourne.

Worst regions (5,000+ businesses)

The average invoice is a third lower

CreditorWatch data also reveals that the average value of invoices is at its lowest point since January 2015.

CreditorWatch CEO Patrick Coghlan attributes a 34% year-on-year decline in the average value of invoices to contracting consumer demand, which is creating a ripple effect down the supply chain.

What’s evident to Coghlan is the knock-on effect that curtailed consumer spending is having on businesses, courtesy of failed RBA attempts to reel in inflation.

“Costs of rents, electricity and fuel are all still very high despite the RBA’s best attempts to drive down inflation,” said Coghlan.

“Mortgage holders are suffering from increased loan repayments as well.”

Also above pre-covid levels are external administrations levels which increased 81% year-on-year to October.

Defaults rising

B2B trade payment defaults – another key indicator of business activity – are also trending up and now sit consistently above pre-covid levels. Also above pre-covid levels are external administrations levels which increased 81% year-on-year to October.

Also making for ominous reading, CreditorWatch expects the national business failure rate to increase from the current 4.21% to 5.78% over the next 12 months.

In addition to rising running costs, CreditorWatch also suspects SMEs are being forced to direct more of their cash towards loan repayments.

With all the data pointing to another challenging Christmas trading period, CreditorWatch urges businesses to follow up on outstanding debts before then.

“A number of retailers are predicting that the Black Friday sales at the end of November will see record turnover, as consumers hunt for bargains and plan their Christmas purchasing well in advance so as not to be forced to pay higher prices nearer to Christmas,” notes the CreditorWatch update.

Other key Business Risk Index insights for October include:

  • B2B trade payment defaults continue to trend upward, with a 60% increase since January.
  • Credit inquiries are trending down as business activity and credit/loan applications decline.
  • Court actions remain flat year-on-year and are well below pre-covid numbers.
  • Businesses in the food and beverage services sector remain the most at risk of payment defaults (6.8%).
  • Transport, Postal and Warehousing is the next riskiest industry at 4.4%, followed by Financial and Insurance Services (4.3%).

Due to less demand for home loans – which impacts mortgage and insurance brokers – the finance and insurance industry has moved up into the top three industries ranked by probability of failure over the next 12 months.

Meantime, with many businesses still struggling to balance high supply costs with lower demand for new housing and renovation work, the construction sector continues to record high rates of external administration.

Inner city CBD area analysis (year-on-year)