Equifax’s latest Quarterly Commercial Insights for December 2023 has revealed a slight downturn in Australia’s commercial credit demand, decreasing by -0.9% compared to the same period in 2022.
The decline in overall business credit demand was driven by a -4.1% reduction in business loan applications and a marginal -0.4% drop in trade credit applications, although asset finance applications saw a notable increase of +8.9%.
Scott Mason (pictured above), general manager of commercial and property services at Equifax, pointed out that varying demand across states contributed to the mixed performance in credit demand during the fourth quarter.
Western Australia and South Australia led in overall credit demand with robust growth rates of +14% and +13% respectively, while Queensland experienced a +4% uptick. In contrast, Victoria faced the steepest drop in business credit applications by -9%, with New South Wales also witnessing a -2% fall. Both the Australian Capital Territory and Tasmania showed no change during this period.
For business loan applications, the largest decreases were observed in Victoria (-16%) and NSW (-6%), with Tasmania also seeing a smaller decline of -3%. Conversely, WA, SA, and Queensland saw increases in business loan demand by +17%, +16%, and +3% respectively, with the ACT remaining steady.
When it comes to trade credit applications, Queensland’s demand remained unchanged, whereas NSW and the ACT both noted a -6% reduction in demand. On the flip side, SA, Tasmania, WA, and Victoria recorded growths in trade credit demand by +6%, +6%, +5%, and +2% respectively.
In terms of asset finance, demand surged across all states during the December quarter. WA and NSW led with the most considerable increases of +12% and +10%, closely followed by SA, Victoria, Queensland, Tasmania, and the ACT with gains ranging from +4% to +9%.
“The increases in demand across all credit types in WA and SA could be reflective of a recent resurgence in the mining sector, which has benefited from stronger commodity prices,” Mason said. 
Insolvency rates have surged, with a +44% increase in the December quarter of 2023 compared to the previous year. The construction sector, in particular, continued to face high insolvency levels, marking a 28% increase from Q4 2022 to Q4 2023.
“Total insolvencies in 2023 consistently surpassed pre-COVID (2019) volumes, due to challenging market conditions seen throughout 2023,” Mason said. “This trend continued through to the end of the year, with December having the highest monthly insolvency volumes in the past five years.”
Payment delays have also worsened, with average days beyond terms (DBT) rising to 6.5 days in Q4, a 44% increase from the same quarter in 2022. The construction industry remained the most affected, with payments lagging an average of 10 days beyond terms, Equifax reported.
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