Business defaults rise strongly, says Veda Advantage

More and more businesses are defaulting on loans and lines of credit, explaining why the government's corporate tax take is down.

Veda Advantage, the country's largest credit bureau, has statistics showing a 49.4 per cent increase in commercial defaults for the year to October 2009, compared to the same period in 2008.

Last month alone, defaults were up 55.3 per cent compared to October 2008.

"These are the numbers which explain, in part, why the government's tax take is down," said managing director John Roberts.

"Businesses are experiencing tough trading conditions and now we are seeing the end result - businesses can't pay their bills,"

He expected commercial defaults to get worse before getting 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," he said.

Finance Minister Bill English said today that businesses sacrificed profits to retain staff during the recession, which was reflected in a lower tax take.

The Crown accounts for the first three months of this financial year released yesterday showed corporate tax revenue was down $900 million on forecast.

Veda Advantage statistics also showed 4.2 per cent increase on consumer defaults for the first 10 months of the year, compared to the same period in 2008.

Defaults by baby boomers remained high at 16.8 per cent for the same period.

Credit card applications went down 13.3 per cent, personal loans fell 4 per cent and hire purchase went down 20.4 per cent for January to October compared to the same 10 months in 2008.

Mortgages were up 20.2 per cent.

'Baby Boomers' played a part in the mortgage hike. Applications for mortgages by those aged 44 to 62 were 25.63 per cent up.

- NZPA