Huge spike in trade debtors as commerce lags households' recession

Tuesday 7th July 2009

New Zealand's largest credit bureau says there has been a "huge jump" in the number of trade debtors not paying their bills and defaulting, with worse to come.

Veda Advantage, which holds credit information on 100% of the credit-active commercial sector in New Zealand, said the nearly 65% rise in defaults between the first half of last year and the first half of this year was "staggering".

Released on the same day as the NZIER Quarterly Survey of Business Opinion, which shows businesses still deeply negative but seeing some light at the end of the recessionary tunnel, the Veda numbers are consistent with two years of declining demand for consumer credit and the onset of the New Zealand economic recession in early 2008, ahead of the global credit crunch.

"We are already seeing businesses fail in this economic climate and we predict that more will follow. We urge all businesses to keep a close check on their debtors," New Zealand managing director John Roberts.

"In Veda's experience, the commercial sector lags behind the consumer sector by up to 18 months. This means that business is still on the downsward trajectory of the economic cycle and it could be 2011 before conditions improve."

The only good news was a slight recovery in demand for consumer credit, although total lending was still 8.2% down on the same time last year.

"The downward cycle is starting to plateau," he said.

The QSBO identified weak demand as the single biggest problem for businesses at present, although recovery in business expectations for the six months ahead suggested the economy could limp out of recession in the fourth quarter of this year.

Businesswire.co.nz

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