Trade payment failures, tax defaults and insolvencies were rising in late 2025 and early 2026, before the Persian Gulf conflict effectively blocked a key oil route and sent crude prices soaring, hammering global growth expectations, CreditorWatch said.
"Things were not disastrous, to be clear, but they were probably a little bit more challenged in the later part of 2025 and early 2026 before the latest pressures," its chief economist Ivan Colhoun told AAP.
"Interest rates and energy prices are two very important explanators or variables that drive insolvency, and both have moved in the wrong direction in the last two months."
The retail and transport sectors had been under particular pressure ahead of the conflict, due to already slim margins in freight and long running-cost pressures dragging on consumer confidence, CreditorWatch data released on Wednesday show.
Several major Australian companies have flagged concerns this week around the conflict's impact on rising costs and supply chain issues, including Qantas, Westpac, A2 Milk and Cleanaway.
"Oil doesn't discriminate," Mr Colhoun said.
"Some sectors are more affected (than others) by higher oil prices and higher energy prices, but it pretty much affects the whole economy."
Everything hinges on how soon traffic volumes in the Strait of Hormuz - a choke point for a fifth of global oil and gas shipments - can return to normal.
An extended period of elevated crude prices would flow through to higher inflation, tighter credit, rising insolvencies, potential fuel rationing, and a likely recession.
"A quicker resolution would prevent a much bleaker outcome, but even then, the margin for error has narrowed," Mr Calhoun said.
Local small businesses and sole traders were at greater risk than their larger counterparts, as they usually lack the capital buffers available to bigger firms to cushion the impacts of higher costs.
Sole traders, while making up 30 per cent of all Australian businesses, account for more than half of ATO tax defaults over $100,000.
The survival rate for sole-trader businesses from June 2021 to June 2025 was just one-in-two, compared to 68 per cent for all companies, according to ABS data.
Following warnings from International Monetary Fund on Australia's economic growth prospects, federal Treasurer Jim Chalmers noted the shock's fallout would be felt for some time, even in a best-case scenario.
"This is a very serious, very dangerous time for the world," Dr Chalmers told reporters on Wednesday.
"Australia is better placed and better prepared than a number of other countries, but we won't be spared the fallout from this very substantial economic shock."
The Albanese government will hand down its fifth annual budget in May.
"I'm really confident that we can strike the right balances in the budget between near‑term pressures and intergenerational obligations," Dr Chalmers said.
12°C