Business Closure Rates Above Pre-COVID Levels, Creditor Group Warns

Western Sydney is bearing the brunt of weak consumer spending with businesses in the region closing at the highest rate in the country.

A customer pays for their goods with cash at South Melbourne Market in Melbourne, Australia on March 26, 2025. Asanka Ratnayake/Getty Images

Despite the Albanese Labor government’s upbeat rhetoric on Australia’s recent economic performance, the numbers tell a bleaker story.

Business closure rates are now “at or above pre-COVID levels,” according to CreditorWatch.

The group’s data found invoice payment defaults surged by 42 percent in March 2025 compared to a year ago.

Business insolvencies, which briefly dipped at the end of 2024, are back on the rise, jumping 17 percent year-on-year in March.

Analysts say defaults are often the first sign before major economic pain.

CreditorWatch’s latest Business Risk Index confirms that inflation and cost-of-doing-business pressures continue to erode the country’s business sector, particularly those reliant on consumer discretionary spending.

Nearly 10 Percent of Restaurants Closed

The data paints a stark picture for sectors reliant on household spending.

Six of the seven industries with the highest default rates are discretionary-based. Topping the list is hospitality, with food and beverage services recording a 9.4 percent closure rate in the past year until March this year, nearly double the average of 5.3 percent.

Administrative support services followed with a 6.4 percent closure rate, and then arts and recreation (6.3 percent), retail trade (5.8 percent), construction (5.7 percent), and accommodation (5.4 percent).

All are now operating at or above pre-COVID failure levels.

Rising rents, wages, interest rates, and soaring insurance premiums are draining balance sheets faster than most can respond.

Small Businesses Squeezed Hardest

While insolvencies remain below the peak levels seen between 2002 and 2012, they are trending above pre-pandemic benchmarks.

But small businesses, many of which lack deep cash reserves, are proving especially vulnerable.

“We particularly feel for small businesses that typically have smaller cash buffers than larger businesses and are less able to take measures to cut costs such as laying off staff or closing locations,” said CreditorWatch CEO Patrick Coghlan, in a release.

Council of Small Business Organisations Australia (COSBOA) CEO Luke Achterstraat has urged the government to reduce the company tax rate from 25 to 20 percent for businesses with turnover below $20 million.

“Small businesses are the engine room of the Australian economy and part of our social fabric,” he told The Epoch Times, calling the latest federal budget “underwhelming” and a “missed opportunity” to support the sector.

Political Battleground of Western Sydney Suffering the Most

CreditorWatch’s March Business Risk Index also flagged the fast-growing Western Sydney region at highest risk for business closures.

Six of the top 10 high-risk zones are in the region, including the Bringelly–Green Valley area, which is forecast to see 7.9 percent of businesses close in the next 12 months.

The area covers Hoxton Park, Leppington, and Cecil Hills, and is currently held by Labor’s Anne Stanley.

In contrast, inner-city Adelaide’s Norwood–Payneham–St Peters area has the lowest forecast risk at 4.5 percent.

Other low-risk zones are scattered across regional Victoria and North Queensland.

Among capital city CBDs, Adelaide leads with the lowest projected failure rate (5.2 percent), while Sydney CBD remains the worst performer at 6.3 percent.

Meanwhile, CPA Australia is urging businesses to check their financial health, cut costs, raise prices where possible, switch suppliers, and rethink product offerings.

Gavan Ord from the group said businesses need to stay focused on survival, not growth.

“It’s possible to minimise risks and seize opportunities through operational efficiencies and market diversification,” Ord added.

Political Fight for the Small Business Vote

With the federal election looming, both major parties have offered some relief to small business voters.

Labor has promised an additional $150 energy rebate, touting $800 in total relief since 2022.

It also plans to invest $900 million via the National Productivity Fund to find ways to cut down business regulation, and another $207 million to modernise business registers.

The Coalition, meanwhile, is banking on tax cuts and skills investment.

Opposition Leader Peter Dutton has pledged to lift the instant asset write-off from $1,000 to $30,000 and to make it permanent.

He also wants to reinstate a $20,000 deduction for entertainment expenses—allowing small business owners to claim tax deductions on meals and entertaining guests.

To tackle skills shortages, the Coalition is aiming to create 400,000 apprentice and trainee positions, offering $12,000 in support per hire in critical industries.

Energy is another focus of the conversation with the opposition banking on its energy plan to lower electricity prices.