Payment defaults and court actions throughout Australia’s building industry are on the rise, the latest data suggests.

In the third quarter edition of its Small Business Risk Review, credit reporting agency and credit management software provider CreditorWatch found that the number of court actions which have been brought about as a result of debtors defaulting on payments to suppliers throughout the construction sector jumped by 40 percent between the second and third quarters of this year.

Compared with the same quarter last year, meanwhile, the number of payment defaults in construction were up 34 percent whilst the number of ASIC notices were up 16 percent.

The comes as defaults are rising across the economy.

Across all sectors, court actions were up 21 percent over the quarter and 8 percent year-on-year whilst payment defaults were up 13 percent year-on-year.

The latest data points to challenges both in construction specifically and in the broader economy.

In building, conditions in the home-building sector are softening albeit from an elevated base.

According to the latest data, the number of new dwellings approved for construction dropped by 19 percent on a seasonally adjusted basis over the year to September.

More broadly, the economy grew by only 1.4 percent over the twelve months to June and actually contracted on a per person basis.

Business are struggling, with businesses surveyed by NAB reporting subdued conditions over recent months.

CreditorWatch chief executive officer Patrick Coghlan says the decline in payment conditions is concerning.

“An increase in court actions should be viewed as a canary in a coal mine for the Australian economy since SME insolvencies are likely to increase on top of the growth we saw in Q3,” Coghlan said.

“Small businesses are the backbone of the Australian economy, so further payment defaults mean trouble for millions of working people and without the certainty of being paid by debtors, companies are unable to make investments in new people, equipment or facilities to fuel their growth.”

Data for the report was drawn from multiple sources.

These include regulators (ASIC, AFSA &Australian Business Register) courts, insolvency notices register (administered by ASIC) and CreditorWatch’s own data on debt collection notices, payment defaults and trade payment data from its 50,000 plus client base.