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State of the Economy

The financial information tabled by the Federal government, as part of the presentation of the Australian budget, highlighted the difficulties that are being experienced in the Australian economy.

The Treasurer indicated that, instead of a forecast surplus of $1B, the actual performance for the year ended 30/6/13 is now forecast to result in a deficit of $19B. The government has indicated that company tax payments were all down on expectations, highlighting that the downturn is affecting big business as well as small business.

The Reserve Bank also expressed an adverse view on the economy when they lowered the official interest rate to 2.75%. The “unofficial” election campaign has also contributed to confidence sapping for businesses. The continued economic problems are reflected in Dun & Bradstreet’s report that the debtors’ days of outstanding is now 55 days, an increase from the previously announced 52 days. There is an expectation of a change of government after the September 14 election which will probably lead to the new government introducing a brutal budget in 2014 in an attempt to generate a surplus within the next 1-2 years. The movement down in exchange rates is welcome news for exporters, but it means that importers will be paying more for products.

As we approach the end of the 2012/13 financial year, the general economic position highlights the need for businesses to be diligent with monitoring their cashflow (particularly debtors and stock) and ensuring that any covenants, contained in bank loan agreements, are being closely monitored to ensure that businesses are not running into problems with their bank.

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