Businesses Default As Recession Bites
Businesses Default As Recession Bites - Helps Explain Low Tax Take
AUCKLAND, 5 November 2009 – Thousands of businesses up and down the country are falling victim to the recession as increasing numbers default on loans and lines of credit.
Veda Managing Director John Roberts says “business always lags about 18 months behind consumers when it comes to a downturn in the economy and they are really hitting the tough times now.”
Latest statistics from the country’s largest credit bureau Veda Advantage show a 49.47 percent increase in commercial defaults for the year to October 2009 compared with the same period last year. Defaults for the October month alone are up 55.34 percent compared with the same month last year.
“These are the numbers which explain, in part, why the government’s tax take is down. Businesses are experiencing tough trading conditions and now we are seeing the end result – businesses can’t pay their bills. This means they are paying less tax and for some - businesses closing down, shops empty and people losing their jobs.”
Mr Roberts expects commercial defaults to get worse before they get better. “The recession may be technically over, but the bad times still have to feed through the economy and businesses will be feeling it well into next year. The tough times aren’t over yet.”
Veda Advantage statistics also show consumer defaults on loans and credit up 429 percent for the first 10 months of the year compared with the same period last year. Defaults by Baby Boomers remain high at 16.80 percent for the same period.
Consumer applications are down for credit cards (13.38 percent), personal loans (405 percent) and hire purchase (20.45 percent) for the January to October period compared with the same 10 months in 2008.
Mortgage applications are bucking this trend. Applications are up 20.20 percent for the 10 month period compared with same period in 2008. Baby Boomers are leading the charge. Applications for mortgages by those aged 44 to 62 are up 25.63 percent for the period.
Note: this release is supported by a power-point containing graphics illustrating these trends. Actual numbers cannot be released.