CreditorWatch says invoice payment defaults have risen almost 50pc over the past year
US President Donald Trump’s tariff regime will put more Australian business behind in invoice payments, sending many into insolvency, says CreditorWatch.
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As US President Donald Trump’s tariff regime threatens to put more of a squeeze on Australian businesses, invoice payment defaults have risen by almost 50 per cent across the past 12 months, according to credit reporting agency CreditorWatch.
CreditorWatch’s latest Business Risk Index reveals Australian businesses remain under pressure across key metrics, increasing the risk of them going into insolvency.
Cost increases and household cost-of-living pressures continued to affect the hospitality sector, with closures hitting a record high of 9.3 per cent in the 12 months to February 2025, up from 7.1 per cent across the 12 months to February 2024. While the economy showed some signs of recovery in late 2024 and early 2025, Mr Trump’s proposed tariff regime threatened a bumpier landing for the Australian economy just as a soft landing was looking more likely.
CreditorWatch said Australia was not a large exporter to the US, which meant the direct impact on the Australian economy was likely to be limited.
It is the indirect linkages that are important, via lower share prices, weaker US and global growth and higher unemployment if tariffs are implemented as broadly and at such high rates as the US is proposing.
CreditorWatch chief executive Patrick Coghlan said businesses would need to prepare for higher levels of credit risk exposure as the effects of a US tariff regime began to bite. “The expected slowdown in economic growth will, unfortunately but inevitably, result in higher insolvencies,” he said.
“We certainly hope that the worst-case scenario of a global recession doesn’t eventuate, but businesses should nevertheless be taking steps now to manage that risk, whether it is reviewing credit policies, running a portfolio health check or monitoring customers more closely.”
CreditorWatch’s data on reported invoice payment defaults revealed a 47 per cent increase from February 2024 to February 2025. Trade payment defaults have a strong correlation with a business becoming insolvent or closing voluntarily. In the following 12 months the risk of a business collapsing rises 0.70 per cent to 7.9 per cent when a business defaults on an invoice payment.
CreditorWatch said the July 2024 income tax cuts provided some relief in the latter part of the year, with payment defaults only 6 per cent higher between October and February.
The credit reporting agency said the February interest rate cut should also provide some assistance in coming months.
However, insolvencies rose in February after having dipped in December and January to below the November high and they continue to trend strongly.
According to data from the Australian Securities & Investments Commission there were 9427 corporate insolvencies in the 2025 financial year to March 2, up 41.8 per cent on the corresponding period in 2024.
“Given the economic and cost pressures and continuing high levels of accumulated ATO tax debt, it’s too early to expect the level of insolvencies to reduce much in the period immediately ahead,” CreditorWatch chief economist Ivan Colhoun said.
The credit reporting bureau said the Australian construction sector had shown some signs of a macro turnaround with the cost of materials levelling off and building approvals bouncing back, albeit mainly for larger multi-dwelling projects.
However, credit demand in the construction sector is being hindered by freestanding-house approvals, which have softened a little in recent months.
Reflecting some of the previous challenges impacting construction, construction insolvencies bounced back near record highs in February, while trade payment defaults recorded a new high for this cycle in February
According to ASIC data there were 2307 construction sector insolvencies in the period July 1 to March 2, with expectations that across the next four months it will overtake the 1977 in FY24.
Originally published as CreditorWatch says invoice payment defaults have risen almost 50pc over the past year
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