The D&B report states that a negative shock to consumer and investor sentiment, a fall in GDP growth and economic stagnation are the threats that have impacted the Australian economy to date.

Corporate credit markets have not yet suffered complete paralysis however the illiquidity that has been hitting US and European lenders has the potential to have flow on affects for Australia. The local economy is also facing housing sector pressures and slowing expansion, with GDP growth at its slowest for over three years in Q2 2008.

The United States and United Kingdom have suffered multiple ratings downgrades this year (two and three respectively) as these countries remain the most exposed to housing market woes and risks of a prolonged economic downturn.

In the US the risk of credit bottlenecks remains elevated - this will likely result in more business failures and an increase in late payments. In the UK liquidations are up fifteen per cent on last year and payment performance has been deteriorating every quarter since Q1 2007. D&B expects firms will face difficulties honouring their debts amid increased uncertainty in the economic outlook, reduced credit to businesses and mounting volatility of the pound.

Payment problems are becoming a significant issue around the globe, with thirty three countries, including eight in the Asia-Pacific region, paying in excess of 30 per cent of their bills at thirty days or more past terms. In the past quarter alone, an additional six countries have increased their percentage of overdue payments to more than 30%. This trend is having significant impacts on business cashflow at a time when funding to cover shortfalls is difficult to access.

In the Asia-Pacific region China has had its GDP growth forecast downgraded  to 8.5% amid growth and employment fears. Meanwhile, although ratings for some of the world's most important economies - Japan and India - remain unchanged these countries are not immune to economic challenges and there are signs that difficulties could lie ahead. The contraction experienced in Japan in Q2 was the largest in seven years and it was accompanied by nominal data showing a 3.3% q/q drop in GDP, the worst drop since 2003. In India the economy grew at its slowest pace in three and a half years in Q2.

According to Christine Christian, D&B's CEO, financial turmoil is driving deteriorating conditions across the globe.

"The sub-prime lending crisis is having significant detrimental impacts on developed and emerging economies throughout the world," said Ms Christian.

"However despite the rating downgrade Australia remains one of the few OECD economies in which central bank rates can still influence the day-to-day functioning of national credit markets.

"Australia will stay in the DB1 risk bracket unless there is evidence of a hard landing occurring however the deteriorating outlook indicates that economic conditions will remain challenging for some time.

"Businesses cannot afford to ignore any warning signs that economic and fiscal circumstances could impact customers or suppliers and ultimately cause financial distress.

"The D&B report also states that cross-border funding for banks and businesses has been substantially affected since the onset of the credit crunch in mid-2007.

International lending has declined, particularly in vulnerable developed economies, and this pattern is set to persist.

Despite some improvements in the outlook in Q2, financial markets have continued to deteriorate. Banks still anticipate threats to their capital base, leading to a contraction in credit and lower levels of liquidity in the global economy.

With credit markets remaining under pressure and financial institutions anticipating rising default risks and higher related financial sector loses D&B expects the slowdown in international bank funding to continue affecting macroeconomic conditions.

"The importance of cross-boarder bank lending has decreased as compared with other sources of funding however it continues to be one of the most important means of finance for companies and banks," said Ms Christian.

"International bank funding shapes business plans and affects the business cycle of debtor economies. The reassessment of global risk that led to the credit crunch has reduced companies' local sources of funding and their access to international bank lending."

"As a result, credit markets will continue to remain under pressure and businesses will face difficulties accessing funds into 2009."

For further information, please contact:

Danielle Woods
D&B PR Manager
(02) 8270 2926

About D&B

D&B is the world's leading provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B manages the world's most valuable commercial database with information on more than 130 million companies.

Information is gathered in 193 countries, in 95 languages or dialects, covering 186 monetary currencies. The database is refreshed more than one million times daily as part of D&B's commitment to provide accurate, comprehensive information for its more than 150,000 customers.

The Australasian operations were bought out by the senior management group in August 2001. It was the first MBO of a wholly owned subsidiary in D&B's history worldwide.

Today Lazard Carnegie Wylie owns an approximate 90% stake in DBA and the local management team a 10% stake.

Strategies for future growth include developing DBA's commercial and consumer credit referencing business; expanding its receivables management outsourcing business; maintaining its lead in the development of unique credit and risk scoring products; and developing new products specifically tailored to the Australasian market. DBA currently employs over 500 people in Australia and New Zealand.