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While CreditorWatch’s Business Risk Review for April painted a mostly positive picture of Australian businesses following the end of JobKeeper, there was one statistic that truly stood out from the crowd. The review found that 17 out of the 19 industry types in the study showed a monthly increase in the time they took to pay their bills. Despite this representing just under 90% of industry covered in the report, CreditorWatch chief economist Harley Dale said the figure exaggerated the overall profile.
“It’s not a pretty picture, you’ve got 17 out of 19 industry groups increasing the time they take to pay their bills, but things can fluctuate from month to month and there are some industry groups that are doing better than others,” he told MPA. “We have a number of sectors in Australia we need to be keeping an eye on but it’s probably fair to say that it doesn’t number down to 17 out of 19.”
CreditorWatch applies its own creditor framework to each update it receives on the number of days that payment times are overdue, he said. Based on this profile it recognises there is still risk around the majority of industries at the moment, but that there are eight in particular that “are of most concern in terms of overdue payment times.”
Out of these eight, the construction industry rates high. While a residential construction boom has done much to feed the economy as it navigates the fallout from COVID, commercial and engineering construction in the private sector has been doing it tough, said Dale.
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There has been some transferability of commercial construction to the residential space because of the demand brought about by government stimulus around home building, said Dale. However, there are certain parts of the sector still suffering.
“If you look at things like new space for wholesale trade, which is doing it pretty tough at the moment, if you look at new space for fresh office development when you’re dealing with a CBD that still struggles with the number of people that are in and out each day – and you’ve still got hotel occupancy rates at 40-50% rather than the 80-90% they’re accustomed to – that has an impact on investment in areas like office construction,” he said. “There is some transferability but not to the magnitude that can offset some of the fallout of COVID that will probably hang over us for a little while yet.”
Despite these challenges, Dale believes the construction industry will bounce back, with commercial and engineering construction not likely to recover until late 2021 into 2022.
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Other industries on CreditorWatch’s list of most concern included administrative and support services and healthcare and social services. While much medical attention has rightly been poured into the COVID-19 pandemic, other services, such as elective surgery, have largely fallen by the wayside.
A lot of small medium sized medical practices are really struggling under the weight of a lack of demand relative to what they had before COVID hit,” said Dale.
Kate McIntyre is an online writer for Mortgage Professional Australia. She has a wealth of experience as a storyteller and journalist for a range of leading media outlets, particularly in real estate, property investing and finance. She loves uncovering the heart behind every story and aims to inspire others through the artful simplicity of well-written words.
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