The outlook for business has taken a turn for the worse with key data — trade receivables — from CreditorWatch plunging to its lowest point since the agency began collecting the data in 2015.
The agency said trade receivables, which measured the average value of invoices, had been sliding since July last year and the 39 per cent drop in January compounded the usual seasonal fall.
In a raft of bad data, the January Business Risk Index also showed business-to-business trade payment defaults had risen 39 per cent year-on-year in “a clear upward trend” with hospitality the sector most likely to default “by a considerable margin”.
“The RBA’s tightening of monetary policy is beginning to bite, on top of other challenges like labour shortages and supply chain disruptions.”
But he said inflation was the biggest challenge and the RBA had little choice but keep the pressure on.
“The number one priority has to be to get inflation under control — pretending it’s not a problem is not an option. Unfortunately, the RBA has to turn the screws in order to sort that out and then hopefully it doesn’t stall the economy.”
RBA governor Philip Lowe warned the Senate estimates committee this week that further rate rises were likely because the bank’s nine increases since last May might have failed to curb inflation.
“All the evidence is that if inflation stays high for too long, expectations adjust and that ultimately leads to higher interest rates and more unemployment,” he said.
With annual inflation to December at 7.8 per cent, the Westpac-Melbourne Institute index showed consumer confidence at historic lows this week and economists are increasingly warning of a recession.
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