New risk index to predict plight of firms

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A new index will provide insights into future business insolvency risks as support measures unwind when the Australian economy pulls out of another steep contraction caused by the impact of the coronavirus pandemic.

Digital credit reporting agency CreditorWatch will launch its business risk index for September next Wednesday, which will complement its existing business risk review.

CreditorWatch chief executive Patrick Coghlan said at present the review looks at insolvency numbers, court actions, defaults and payment times.

"What the business risk index is doing is actually showing a forward looking prediction," Mr Coghlan told an online briefing.

"It complements what we have been doing and takes it to that next level."

The index will measure where risk exists across the country and within Australia's regions, and the probability of default among industries.

"For government in particular, it's a great way for them to be able to understand where they should be focusing attention," Mr Coghlan said.

"The fact that we are in the middle of a pandemic and a significant downturn, but about to accelerate out of it, I think it is going to give us really good insights into which regions and industries need additional assistance."

The economy is widely expected to have gone into a contraction of as much as four per cent in the September quarter as a result of the lockdowns in NSW and Victoria, the nation's two most populous states.

But with high vaccination rates against the virus and plans to ease restrictions in the coming weeks, the economy is expected to resume its recovery in the December quarter, although there is uncertainty how fast the rebound will be.

But Treasurer Josh Frydenberg has already confirmed business assistance would end for states and territories when double-dose vaccination rates reach 80 per cent for Australians 16 and over.

As of Wednesday, almost 60 per cent of Australians were fully vaccinated nationwide.

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