Faltering economy hits bill payments

PHIL REID/Dominion Post

DEFAULT: The slumping economy means companies are struggling to pay bills and consumers are scaling back loans for big-ticket items.

Relevant offers

Businesses are struggling to pay bills as the economy falters.

Defaults rose by 24 per cent in the first half of this year from the same time last year.

Figures from credit information company Veda Advantage also show households are borrowing less for big-ticket items and mortgage applications have fallen 21 per cent amid the housing slump.

Veda Advantage New Zealand director John Roberts said the jump in commercial credit defaults indicated that small to medium-sized businesses were struggling.

"SMEs are the leading indicator for the state of the economy, and the fact that we have seen such a substantial rise in the number of defaults in the commercial sector is a worrying sign that we're slipping into recession."

Overall, consumer defaults were up 7 per cent, but for 18- to 27-year-olds, they were 8 per cent higher.

People were increasingly failing to pay bills for services such as telephones - defaults were up 148 per cent - and the Internet, up 100 per cent. This trend would escalate as the economy became more recessionary, Mr Roberts said.

Veda Advantage says the number of applications for consumer credit is down 10 per cent on the first half of last year. Within that, hire purchase applications were down 9.5 per cent. Use of hire purchase has been falling for four years.

Lower consumer confidence and the rise in living costs were reflected in personal loan applications falling 16 per cent, Mr Roberts said. "That new washing machine or car is too much of an additional burden for many households to shoulder at the moment."

But debt continues to flow to credit cards, with applications up 10 per cent.

- © Fairfax NZ News