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Australian companies’ payment behaviour reveals unnerving pattern: Is our economy really recovering?

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Australian firms are on average still taking three weeks more than the standard 30-day-term to pay their bills, a pattern that may de-rail the recent economic recovery.

In a recent speech to the Regional Business Leaders Forum in Queensland, Reserve Bank Governor Glenn Stevens hinted an “upswing” in the Australian economy based on the latest figures on unemployment rates and GDP growth.

Yet another economic indicator, the average number of days businesses take to pay other businesses, reveals an unnerving pattern.

According to the latest trade payments analysis by Dun & Bradstreet (D&B), the payment terms of Australian firms have risen for the third consecutive quarter – to 54.1 days, over three weeks above the standard 30-day term. This is only three days less than the same figure from the height of Global Financial Crisis a year ago.

Average payment days (source: Dun & Bradstreet)

In addition, the latest results also indicated that 27 percent of firms continue to face difficulties accessing credit. This inability to access funds to cover shortfalls makes cashflow management a critical component to business sustainability, and can potentially affect the stable recovery of the Australian economy on a macro level.

“The outlook for Australia in 2010 is solid, particularly compared to other developed nations,” said Christine Christian, Dun & Bradstreet’s CEO.

“However if we are to continue on a path to strong economic growth, executives need to maintain a vigilant focus on the business fundamentals of cashflow and credit risk which were deemed critical to survival during the crisis.”

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