Veda Advantage sees 'massive' deterioration in overdue debts; points to 'fundamental shift' in approach to debt and spending
Veda Advantage, New Zealand's largest credit checking firm, has reported what it calls a massive hike in consumer debt defaults and that about half of New Zealand's companies face outstanding debts.
VedaAdvantage said it was seeing a fundamental shift in New Zealanders' attitudes to debt and spending, with more credit pain to come.
"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," said Veda Advantage Managing Director John Roberts.
Prime Minister John Key commented yesterday that the economy had slowed because more people were saving. See the full story here.
“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,” Roberts said.
Consumer defaults rose 17.95% for the first nine months of 2010, Veda Advanatage said, adding defaults in the same period a year ago had been falling.
Providers of goods and services list unpaid/overdue bills with Veda Advantage when individuals or companies have failed to pay after 30 days.
Baby Boomers leading defaulters
It said Baby Boomers were 'leading the default pack.' Baby Boomer defaults rose 20.90$ with Gen X close behind on 19.42% and Gen Y on 15.34% percent.
“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,” Roberts said.
Veda Advantage’s Positive Trade Commercial Bureau showed 336,716 companies had outstanding debt, which represented about half the country’s trading companies.
"The most concerning aspect of this data is that NZ$12.2 million of this debt is overdue by 90-120 days," Roberts said.
"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," he said.
VedaAdvantage said it was also seeing consumer resistance to credit cards with applications for the nine months to September 2010 down 13.53% on the same period last year.
Applications in September were down 21.55% from a year ago with Baby Boomers applications down 24.53% and Gen X applications down 25.24%.
10 Comments
Well there's really only one place to go to get the 'savings' to pay these bills! "Let me see; where is that savings book....under the mortgage document in the top drawer? Nope. Ah! It must be the mortgage document.....I hope here's a little equity left"
Unlike Aussie where they're okay...or are they?
" (RBA) Members observed that falling house prices and high levels of household debt indicated that "the process of repairing household balance sheets would be protracted".
http://www.businessspectator.com.au/bs.nsf/Article/RBA-says-pd20101019-ACUSA?OpenDocument&src=hp1
JK says farmers may be forced off the land.
Pray tell who got them into their debt positions.
Consumers reducing debt (many have little choice) causing the economy to choke.
Who is to blame for that?
Stop bleating and get it over with as soon as we can.
It could be electoral suicide to adopt that approach by JK and BE but in the long run best for the country.
All IMVHO of course.
So true Justice,
My neighbour works for one of those long in business small enterprises. He has been sent home from work two days out of five for quite a while now.
The business OD has to be up to the limit now and nobody is spending (or allowed to by their bankers).
No wonder JK is looking like a possum in the headlights....Things ain't looking pretty.
A summer of discontent approaches as Mr Market gets a better grip on households and small business, plus we have yet to see interest rates escape the fraud at the Fed..but it's coming and when the price of debt explodes on the back of the QE games going on...oh shite you just don't want to be holding the debt cards...probably not the credit ones either as many a bank will go to the wall. That's the danger in term deposits...try getting you capital back at short notice....those company bonds will turn the colour of sick.
The banks are now desperate to get punters to sign up for more debt...expect a sales drive...more fluff from the Kiwibank ceo...some gospel from JK...a heap of media blather...borrow and buy everyone..we must keep the property ponzi bubble going...hurry hurry.
Wolly, how is the price of debt (interest) going to rise when there is massive QE going on? In my view, interest should lower yet again when there is tons of more money (debt) going around in the system. Lot of supply, not much demand.
And if i'm allowed to speculate further, the official inflation measures will most likely be heavily dressed (as per usual) to be able to avoid putting up the OCR. I believe governments/central banks around the world are thinking inflation is the only way out of this mess, and will of course pursue this path no matter what. So this will provide a strong artifical pressure downwards of interest rates.
I do hope i'm wrong, of course. What is starting to happen is nothing but madness.
Those who own the credit that you borrowed will raise the cost of that debt at the first chance they get.....they tell you it costs more because the value of the shite paper is being diluted by the QE...the reason the rates remain low in the States is because a fiddle is going on...a fraud....the QE $ is being loaned to the banks very cheaply on condition they bid for the Treasury toilet paper at low rates...and so the fraud develops. The thieving banks borrow the fresh digits for .25% and then loan it to the thieving govt for 2.5%..hey presto the bank creams off 2.25% in fat profit...and the dumb citizens believe the data saying rates are 2.5% for 2yr Tbills. They then use the 'profit digits' to buy even more Fed shite and away they go to 'buy' more govt Tbill poop.
The govt loans out this new money that cost it 2.5% when it sold Tbills....to home buyers who are suckered into mortgages when the loans have a 3% rate for 10 years or a 2.9% for thirty years......the whole system is a gargantuan fraud paid for by the stupid citizens who fail to understand the govt and the FED are stealing from them.
The Fed is creating the credit...in doing so it is doing a Zimbabwe with the $....that is why gold is rising!.....Now how would you feel if you were an Aymereekan and your savings were being eaten away by the Fed....would you keep your savings in US dollars....or would you buy gold?
"It said Baby Boomers were 'leading the default pack.' Baby Boomer defaults rose 20.90$ with Gen X close behind on 19.42% "
i wonder what would happen the the stats if the BB and GenX age groups where defined more in line with their generation mentality..being BBs at least 55 or 60 and over....which puts the division around school leaving time before/after overdrafts and credits cards where introduced to NZ around 1970/72.... a very critical time of social change and attitudes to credit.
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