Liam McNally
Businesseses in Melbourne’s west and north-west are among the most likely to fail in Victoria according to new data from CreditorWatch.
CreditorWatch’s Business Risk Index (BRI) analyses the credit information of more than 5000 registered Australian businesses across 300 regions to provide a snapshot of the best and worst performing regions.
The latest data shows seven of the eight regions in Victoria where businesses are projected most likely to default in the next year are in Melbourne’s west and north-west.
Wyndham is the fifth-worst performing region in the state, with a projected 6.64 per cent default rate.
Also in the eight most likely to default are Brimbank, Tullamarine-Broad Meadows, Melton, Maribyrnong, Hobsons Bay and Whittlesea-Wallan.
The region most likely to default in the state is Casey-South, with a rate of 7.01 per cent.
CreditorWatch chief executive Patrick Coghlan said while you can have really good quality businesses in the highest credit-risk regions, the data shows that the conditions and the businesses within those areas have a higher chance of failing than those other areas.
“What we find is rental and property costs are carrying a far heavier burden in [Melbourne’s west and north-west] than the average Australian region. We also find that population population density is very high, so that means there’s a high level of competition.
“And then the third [factor] is probably the economic opportunity overall.”
Mr Coghlan said it’s typical to see clusters of regions performing in a similar matter.
“The knock on effect can be quite significant in that there’s a higher likelihood of unemployment there’s also less money around within that area for businesses and consumers so, so all people and businesses suffer as a result,” he said.
“It’s a vicious cycle.”
Mr Coghlan said the biggest drivers that could help improve the situation include reducing inflation and cutting interest rates.
“Ultimately, that’ll drive investment and confidence within the business community,” he said.
“I think overall, we’ll get some good news probably around the middle of the year when we start to get some certainty as to when those cuts might come.
“Having that sort of light at the end of the tunnel is really valuable and powerful for businesses of all sizes.”
