Massive hike in consumer and company debt

Published: Tue 19 Oct 2010 05:06 PM
Massive hike in consumer and company debt
19 October 2010, Auckland. Latest statistics from the country’s largest credit bureau show a massive hike in consumer defaults and more than 50 percent of the country’s trading companies with outstanding debts.
Providers of goods and services list unpaid/overdue bills with Veda Advantage when individuals or companies have failed to pay after 30 days.
Consumer defaults have leapt a massive 17.95 percent for the first nine months of 2010 (January to September compared with the same period in 2009 when the number of defaults were falling.) Baby Boomers are leading the default pack.
For this nine month period, defaults by Baby Boomers were up by 20.90 percent with Gen X close behind on 19.42 percent and Gen Y on 15.34 percent.
Veda Advantage Managing Director John Roberts says these figures are sobering.
“Tens of thousands of New Zealanders are finding they just can’t pay their bills, they are going into arrears and then finding their credit record is affected – defaults stay on credit reports for five years and will have a huge negative impact for anyone trying to obtain credit during that time.”
Of equal concern is the debt owed by companies. Veda Advantage’s Positive Trade Commercial Bureau shows 336,716 companies have outstanding debt. This represents approximately half the country’s trading companies.
The most concerning aspect of this data is that $12.2 million of this debt is overdue by 90-120 days.
Mr Roberts says “at this point these debts are likely to be written-off, which will have a severe impact on creditors and ultimately serve as a further negative impact on business, business returns and the wider economy.”
The statistics also show continued consumer resistance to credit cards with applications for the nine months to September 2010 down 13.53 percent on the same period last year.
Applications last month were down 21.55 percent compared with September 2009 with Baby Boomers and Gen X showing a pronounced change in attitude to credit cards (Baby Boomer applications for credit cards were down 24.53 percent in September 2010 compared with September 2009 while Gen X applications were down 25.24 percent over the same period.)
Mr Roberts says there is no doubt that we are witnessing a fundamental shift in the economy with consumers exercising caution and opting to save, as observed by Finance Minister Hon Bill English and the Reserve Bank of New Zealand.
“Our statistics show there is a lot more pain to come but the big question is whether the swing to caution has gone too far making the economy slower, tighter and tougher for everyone.”
Mr Roberts says that while the economy is recovering from recession slowly and probably in a more solid and long-term way, it is improving and it is important for people not to lose sight of this.

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