Register Interest
Save time and get paid faster
Register to find out how easyAR will improve your cashflow and help you get paid faster!
The NCI Trade Credit Risk Index fell 2.1 per cent in the December quarter 2023, partly unwinding the steady rise in the index since the low point in the December quarter 2021.
The NCI Trade Credit Risk Index fell 2.1 per cent in the December quarter 2023, partly unwinding the steady rise in the index since the low point in the December quarter 2021.
The updated TCRI is consistent with a slowing economy but it suggests the economy will experience a soft landing in 2024. Fears of a hard landing or recession are not currently supported by the credit risk results.
The fall in the TCRI on this occasion is seasonal – the index has declined in each of the past five December quarters and is likely linked to the lift in economic activity that occurs every December quarter.
“By way of background, a rise in the TCRI signals a rise in credit insurance claims and is an indicator of economic conditions in the Australian economy…”
Despite the fall in the Index in December quarter, it is around 15 per cent higher than a year ago. This remains consistent with the slowing economy which has been triggered by the interest rate hiking cycle of the RBA and cost pressures which have been impacting consumers and related sectors.
The detail of the December quarter had mixed news. The number of claims actually rose 2.6 per cent while the number of collections fell 29 per cent with a 20 per cent fall in the value of claims lodged.
The industry trends continued to show the largest number and highest value of claims has been in the ‘building and hardware’ and ‘electrical’ sectors. The housing construction sector has been in trouble in 2023 – high costs of materials, labour shortages and rising interest rates have seen a series of high profile business failures.
As has been the trend over the recent past, the number of claims remained relatively low in ‘finance’, ‘steel’ and ‘electronics’.
New South Wales accounted for 34 per cent of claims, followed by Victoria with 32 per cent and Queensland with 9 per cent. Claims in South Australia, Tasmania, the ACT and the Northern Territory were very low or even zero.
The big picture showing up in the TCRI results are consistent with soft economic conditions, but with a low probability of severe weakness. The data fit with the view emerging that the economy is slowing to the point that make further monetary policy tightening is unlikely in 2024. Indeed, there remains a risk that an extended period of soft growth will see business financial stress rise unless there is interest rate relief is delivered by the RBA.
There are growing expectations for interest rate cuts in 2024. If they come to pass, it would be welcome news for the business community.
View the full Trade Credit Risk Index.
You may also be interested in…
eNewsletter
Sign up to receive the latest news and information from NCI
