Save Your Spot - October 31, 11:30am AEST
Webinar: Holistic Credit Solution
The third seminar, Holistic Credit Solution, is the final session in the series and jumps into how to round out your credit risk management.
The NCI Trade Credit Risk Index rose 13 per cent in the March quarter 2024 as business insolvencies reached a record high. The NCI TCRI which is based on an aggregate of claims data, collection activity, credit limit decisions and overdue accounts, rose to its highest point since the June quarter 2020 which coincided with the early stages of the COVID pandemic.
In many respects, the rise in the TCRI is not surprising given the clear slowing in the economy from over the past year and as the 425 basis points of interest rate hikes since May 2022 impacts business activity and cash flows.
The trends in the components in the TCRI were all reflective of the economic pressures.
In the March quarter, the number of collections rose 52 per cent, the value of claims lodged rose 14 per cent while there was an 11 per cent increase in the number of serious overdues reported.
“The number of Collections rose 52 per cent, the value of claims lodged rose 14 per cent.”
These trends are consistent with the broader economic picture showing marked weakness in the economy, especially in business related to the household sector and residential construction.
As has been the case for more than a year, both the number and value of claims are highest, by a large margin, in the building and construction sector. New dwelling starts are at their lowest level in more than a decade and a surge in building costs have made many construction projects unviable. The short-term outlook for construction remains problematic.
The other areas of concern were finance and food and provisions, the latter being linked to the significant scaling back of discretionary consumer spending in restaurants and on take away meals.
By State and Territory, most of the claims in the March quarter were again in Victoria at 31 per cent while Queensland over took NSW with 28 per cent of all claims. 23 per cent of all claims were in NSW. It is likely that economic conditions will remain weak in the near term.
That said, there is cause to be reasonably optimistic about the medium term outlook. Income tax cuts take effect on 1 July 2024 and the recent budget is paying subsidies on electricity bills for some renters. Lower inflation at a time when wages are recording moderate growth will boost real wages.
Steady to lower interest rates, if delivered, suggest late 2024 and 2025 will be better years for the economy.
The full Trade Credit Risk Index can be viewed here.
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