WA businesses stay afloat as national payment stress and closures rise

WA is a national business bright spot, with local firms showing less financial stress than much of the country as cost pressures build again. CreditorWatch data shows WA is well below the national average for business closures, just below average for business-to-business payment defaults and records the lowest level of 60-day arrears in Australia. The figures suggest the State economy is holding up better than most, helped by resources, population growth and less exposure to some of the sectors under the worst pressure nationally. Perth ranked second among State capitals behind Adelaide on CreditorWatch’s Business Risk Index, while Augusta/Margaret River/Busselton was WA’s strongest-performing region among areas with at least 3000 businesses. CreditorWatch economist Ivan Colhoun said WA’s stronger result reflected a favourable economic backdrop, not immunity from national pressures. “When the mining sector is doing well, I think it tends to have some very beneficial effects for the whole of the WA economy,” Mr Colhoun said. “I’m not saying it’s booming, but it’s doing pretty well.” Mr Colhoun said the benefits flowed beyond mining into services, retail, manufacturing and transport. WA’s population growth has also helped cushion local firms, adding demand for housing, construction, services and consumer spending. Australia’s population has accelerated in recent years, largely on the back of migration, with WA now leading the nation at 2.5 per cent annual growth. Queensland and Victoria are also expanding strongly, while Tasmania has the slowest growth rate at 0.7 per cent. Mr Colhoun said WA’s expanding population had supported broader industries, particularly construction and housing. “The fundamentals of Western Australia’s population growth has been pretty helpful as well,” he said. WA has also avoided some of the industry pressures weighing more heavily on other States. Mr Colhoun said hospitality had been weak nationally, while construction insolvencies looked less severe when measured as a share of operating businesses. Agriculture also helped, with the sector ranking among the lowest nationally for insolvencies. But the stronger WA result comes with a warning: the pressure gauges are still moving higher. In April, CreditorWatch chief executive Patrick Coghlan warned Middle East developments, oil prices and inflation were pushing fuel and energy costs higher. The comments came as late payments nationally hit their highest rate in six years. “We are not seeing a sudden collapse in business conditions, but we are seeing a less forgiving trading environment,” Mr Coghlan said. “More invoices are sliding beyond 60 days overdue, and the stress is concentrated in sectors central to household spending, supply chains and small business employment.” Mr Colhoun said default rates fell during the pandemic as low rates, government support and a softer tax office approach helped businesses stay afloat. But the trend began to turn through 2024 and 2025 as higher interest rates hit and the Australian Taxation Office resumed pursuing business debts. More recent rate rises and high fuel prices had added pressure in recent months, helping push default rates and arrears higher. Mr Colhoun said rate pressure was still flowing through the economy, while energy costs would depend partly on whether tensions in the Middle East eased. “Hopefully the peace agreement holds between the US and Iran,” he said. “Energy pressure is very important to businesses. The two biggest pressures can be interest rates and energy, and energy is typically quite a high cost.” Smaller and weaker businesses were most exposed, particularly as the national wage case delivers a 4.75 per cent increase in minimum award wages from July 1. “That comes on top of higher interest rates, so that may be a bit of a challenge,” Mr Colhoun said. “But that’s for all businesses across Australia, and Western Australia to me would seem better placed to deal with it.” Mr Colhoun said it was too simple to say WA was easier than NSW or Victoria, but the State had benefited from a more favourable backdrop over the past three to five years. “It probably is easier to run a business when the tide’s coming in than when the tide’s going out,” he said.

WA businesses stay afloat as national payment stress and closures rise

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