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Commercial defaults soar 47% as economy slumps

By Paul McBeth

Thursday 13th November 2008

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New Zealand businesses are struggling to repay their debts with the number of defaults jumping by 47% in the third quarter, according to credit bureau Veda Advantage.

Finance companies posted the biggest surge in defaults, with the number soaring 150%, defaults for trade credit providers jumped 132%.

“This is clearly an uncertain time for the economy; businesses are wary about saddling themselves with more debt,” director John Roberts said in a statement. “The stress on business is more significant.”

Commercial credit inquiries were down 9% on the same period, with credit applications from banks tumbling 19% and finance companies slipping 16%, according to Veda. The economy officially entered recession in the first half of this year, the first contraction since 1998, spurring the Reserve Bank to embark on its steepest series of cuts to the official cash rate since its introduction in 1999.

Roberts said the majority of businesses surveyed were optimistic about a change in government, “so it will be interesting to see whether there is any recovery in the credit market following the election.”

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