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New Downturn or New Equilibrium?

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There’s no doubt that business and consumer confidence in Australia has taken a sudden hit. Clearly, there’s concern that the world is hitting for another downturn that we can’t escape. Or is this part of a structural shift that will see a decline in manufacturing and a consumer spending less and saving more?

In this edition of BTalk Evan Davies talks about the latest CEO Institute Business Confidence Index, which has fallen from +53 to -39 in just six months. He says business has largely adopted a wait and see approach, driven largely by the deterioration in the international economy.

There are signs that, aside from worries about the future, businesses are hurting now. Statistics from National Credit Insurance shows claims for business-to-business bad debt are 40 percent up on the average for the last six years.

Dun & Bradstreet has shown that payment terms are also increasing — two thirds of Aussie businesses are taking more than 30 days to pay up. It’s a particular problem in the manufacturing sector where the likelihood of severely delinquent payments increased by 10 per cent in the four months to June 2011 — in some sectors, such as primary metals, paper, furniture and finished products, delinquency rose by 20 per cent.

D&B’s CEO Christine Christian says many business see a repeat of 2008, when we were heading into the global financial crisis. Hopefully, this time, more businesses have learnt how to charter a course through the distress.

First published on CBS News

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