By Gareth Vaughan
Household debt levels fell 10% in the September quarter, Dun & Bradstreet says, but the dollar value of referred debts remains 35% higher than figures recorded in the September 2007 quarter, before the global financial crisis.
Credit reporting agency Dun & Bradstreet says the average value of referred debts stands above NZ$700. Despite the number of accounts referred for collection falling by about16% since the height of the global crisis, this also remains above 2007 levels.
John Scott, Dun & Bradstreet's New Zealand general manager, says men aged between 18-33 and 49-64 and those living in the North Island in particular, are demonstrating signs of potential financial stress.
“In addition, the significant volume of referred debts indicates that a number of individuals could be experiencing their first negative credit event,” says Scott.
Men accounted for 54% of a referred debts, a turn around from 2007 and 2008 when women were responsible for a greater number of debt referrals. The average value of referred debts is also higher for men than women, with debts for men above NZ$800 and women below NZ$700. Scott says these numbers are up 25% and 23%, respectively, on pre-credit crisis debt values of about NZ$650 for men and NZ$550 for women.
Meanwhile, people living in the North Island account for more debt referrals than mainlanders with a split of about 80/20, Scott says.
“However, South Island residents recorded higher average debt values than their northern counterparts during the September quarter 2010 at around NZ$700 and NZ$670 respectively,” Scott says.
“For North Island residents this is a 21% increase on 2007 figures, while for South Island inhabitants it’s a 45% rise.”
Scott says those aged up to 33 account for the biggest chunk of referred debts at 44%. But people aged between 49 and 64 recorded the highest average debt values during the September
quarter at about NZ$800, 65% up from 2007.
In particular sectors, Scott notes telecommunications debts have risen 22% with utilities debt values up about 56%.
And despite the 10% September quarter fall, Scott says for some households the return to a more sustainable financial situation could take some time.
"Consequently it’s imperative that credit providers conduct suitable due diligence to ensure they provide appropriate levels of funding for each individual's situation,” says Scott.
“This process will also assist credit providers to effectively manage their lending book as default risk will remain prominent in the months ahead."
He says a significant number of New Zealanders aren't aware of the potential consequences of not paying their bills on time.
"Not paying a credit obligation on the due date can negatively impact an individual's ability to access credit for up to five years so it's critical that every credit commitment is taken seriously," Scott says.
"Phone bills are a prime example – many people think that missing a non-bank account doesn't matter and won't affect their credit record however, this is absolutely untrue."
"Consumers should put themselves in a position to understand what information is listed on their credit record and act appropriately to manage all credit commitments. Failure to do so could result in an inability to access credit in the future or to high interest costs due to a poor credit history."