Business risk conditions in Perth CBD defy fall in foot traffic: CreditorWatch

Danielle Le MessurierThe West Australian
Empty streets looking down towards St Georges Terrace in the Perth CBD during the first morning of the lockdown in Perth on February 1, 2021.
Camera IconEmpty streets looking down towards St Georges Terrace in the Perth CBD during the first morning of the lockdown in Perth on February 1, 2021. Credit: RICHARD WAINWRIGHT/AAPIMAGE

Business risk conditions in Perth city have improved more than any other capital city CBD over the past 12 months despite the COVID-19 pandemic causing a sharp fall in foot traffic.

CreditorWatch’s business risk index shows Perth and Brisbane CBDs are in fact improving faster than Melbourne and Sydney, with WA benefiting from a strong performance across the booming mining and agribusiness sectors.

The index ranks more than 300 Australian regions by relative insolvency risk from best to worst on a scale from zero to 100 using data from the Australian Securities and Investments Commission.

It comes after research released last month by the Committee for Perth found visitors to the CBD had fallen by an average of 28.5 per cent in the 18 months to November this year.

CreditorWatch chief executive Patrick Coghlan said the index, released on Wednesday, looked at businesses headquartered in the city and not just those with shop fronts like cafes and clothing retailers, “so while people may not come into the city businesses can still be improving”.

He also said it was important to note the index was relative and looked at Perth CBD compared to all other regions in Australia, and that there had been improvements in the factors used to determine the index.

Falls in observed trade payment defaults and insolvencies over the past year had the biggest impacts on Perth CBD’s risk rating, which was sitting just above 60 in November. That figure is about 10 points higher than the same time last year.

However, Adelaide retains the crown of being the highest rating major capital city in Australia with a score of over 70 last month.

Mr Coghlan said the data indicated States that allowed their internal economies to function while borders were closed are now reaping the benefits, while those that locked down their cities are struggling to return to pre-lockdown levels of business activity.

“Melbourne and Sydney CBDs remain the worst performing capital city centres with probability of default at historic high-levels due to depressed trade activity continuing post-lockdown,” he said.

“The fact WA has remained open to itself and enjoyed significant freedoms as a result, businesses are faring better.”

But he acknowledged that while Perth was generally a strong performer among the capital cities, costs of living and real estate prices were not as high as Sydney and Melbourne.

“This gives Perth a good starting point and the (other) factors have caused the recent improvement,” Mr Coghlan added.

The credit reporting agency’s business risk index for November also revealed business activity around Australia is currently weaker than expected, indicating the return to pre-COVID levels is likely to take longer than anticipated.

National data showed a jump in defaults, external administrations, payment arrears and court actions from October to November. However, credit enquiries rose 17 per cent, indicating that business confidence is improving.

“The increase in credit enquiries is an encouraging forward indicator of business confidence, however, there’s a long way to go,” Mr Coghlan said.

“Worryingly, trade receivables continued to decline last month, and we also saw significant increases in defaults and administrations.”

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