New Zealand businesses paid their accounts at the fastest rate in a decade in the final quarter of 2013 in a sign companies are benefiting from an improving economy, according to credit reporting firm Dun & Bradstreet New Zealand.
Companies took an average 39.6 days to pay their bills in the fourth quarter of 2013, down from 41 days in the third quarter, according t Dun & Bradstreet's latest Trade Payments Analysis report. The last time companies took fewer than 40 days to pay their bills was in the second quarter of 2004, at 39.7 days.
New Zealand's economy accelerated at a 3.1 percent annual pace in the fourth quarter, prompting the Reserve Bank to raise interest rates for the first time in four years to stave off rising inflation. Governor Graeme Wheeler kicked off a tightening cycle this month, lifting the official cash rate a quarter-point to 2.75 percent and he anticipates raising the OCR another 2 percentage points over the next two years.
"Companies' financial performance is improving, and because it's improving they've been able to pay their bills faster," Dennis Martin, general manager of Dun & Bradstreet New Zealand, told BusinessDesk. "It's a reflection of the ongoing improvement we've seen in the past year, in particular as is reflected by the interest rate decision."
The decrease in days shows New Zealand's economic momentum, particularly in comparison to Australia's average of 53 days, Martin said.
"The comparison to Australia is always interesting, it shows they've really stalled in their economic performance while ours continue to improve," Martin said. "Our forecasts are for New Zealand's key economic measures to continue improving this year, and consequently we also expect to see consolidation of this trend of faster business payment times."
Businesses paying their bills in the standard 30-day period rose to 66 percent, from 61 percent in the same period the previous year.
Forestry, New Zealand's third biggest commodity export, saw the biggest decline in payment times, down to 33 days from 35 days on the previous year. The agriculture sector also improved, reducing the rate it settles accounts by one day, to 36 days.
"The decline is across both North and South Islands, and Auckland, Christchurch and Wellington all finding declines too, so it's not a unique proposition just to the major cities," Martin said.
Transportation increased by eight days, to more than 46 days to settle accounts. Martin said it was an anomaly, and was unable to explain the rapid increase. Retail and wholesale trade, manufacturing and mining all recorded a slightly slower pace in settling accounts.
Smaller to medium sized businesses saw a decrease in time to pay, while larger companies were slower to settle than the previous year.