This dramatic chart is one of the most encouraging signs you'll see for Australia's economy

Photo: Paul Kane/ Getty.

Australian businesses paid their invoices at the fastest pace in over a decade last quarter, indicating that firms are growing increasingly confident about their financial position.

That’s the finding of Dun & Bradstreet’s December quarter trade payments report, with the average settlement period falling to just 44.1 days.

In a sign that improved operating conditions may be contributing to the continued decline, the average settlement period was down a full day on the prior quarter, and six days faster than the level of a year earlier.

The chart below, from Dun & Bradstreet, reveals the scale of the improvement seen in 2015.

Like the overall average, 68% of firms indicated that they settled accounts within 30 days during the quarter, up from 66% in Q3.

To Stephen Koukoulas, economic advisor to Dun & Bradstreet, the improvement is great news for Australia’s corporate sector.

“The further fall in the payments times for the business sector shows that firms are not only cashed up, but confident about their financial position,” said Koukoulas following the release of the December quarter report.

“The record low interest rates set by the RBA are freeing up cash flow and lowering borrowing costs and underpinning a strong performance for corporate Australia.”

Koukoulas notes that approximately 94% of firms made payments within 60 days during the quarter, suggesting that “there is no pressure from the trade payments data to suggest any need for the RBA to cut interest rates again”.

Dun & Bradstreet believe that the trade payments report has a distinct advantage over other forms of company data, providing a near real-time indicator on the current financial performance of Australian firms.

The improvement in the Dun & Bradstreet report corresponds with a noticeable lift in Australian business conditions over the second half of 2015.

According to the separate NAB business confidence survey released earlier this week, operating conditions for Australia firms have been above their historic average in each of the past 10 months.

“While recent big declines in oil and equity markets highlight potential risks to the global outlook, relatively positive business conditions appear to have, so far, acted to reassure business sentiment,” said Alan Oster, chief economist at the NAB.

Combined, the Dun & Bradstreet and NAB surveys suggest that Australian businesses are enjoying strong operating conditions at present, in line with improvement in non-mining sectors of the economy seen in recent years.

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