Australia arrears warning for NZ

Chris Timms
Chris Timms
New Zealanders should take some warning from data out that showed Australian mortgage arrears had reached a new high, Craigs Investment Partners broker Chris Timms said.

Ratings agency Fitch said the 30-plus-day delinquencies in the Australian prime residential mortgage sector had reached a record high of 1.79% in the first quarter of the year.

Christmas spending, the Queensland floods and the November 2010 interest rate rise all adversely affected the ability of borrowers to service their debt.

Fitch said the factors that had affected mortgage performance in the first quarter were likely to be temporary and an adjustment in the next quarters was probable, although dependent on any changes in monetary policy as well as any increase in the cost of living.

Mr Timms said the warning signs were there for New Zealand, with two earthquakes having affected the economy generally.

"What is helping us is that our interest rates have not risen and are at much lower levels than in Australia. But it is a good thing to take note of at this time."

Details were not readily available about how Christchurch residents were meeting their mortgage and other payments, he said.

Data out this week did show New Zealand businesses, struggling against a grim economy and natural disasters, were taking longer to pay their bills, Mr Timms said.

Business-to-business payment terms deteriorated by two days in the March quarter to reach an average of almost 46 days and a 12-month average of 44.5 days, according to the latest Dun and Bradstreet's trade payments analysis.

The figure compares with a peak of 51.9 days in 2001 and it fell as low as 40.9 days in 2004.

Mr Timms said, while the data indicated a growing trend of tardiness towards trade accounts, overall only 5% of New Zealand businesses paid accounts between 31 and 60 days late and the number of those more than 60 days overdue was small.

"The figures worsened, but we are still quicker at paying than our Australian neighbours, where the level of severely overdue trade accounts has risen by 20%. The average Australian account takes almost two months to be paid.

"You are better off this side of the Tasman. You get paid faster," he said.

Dun and Bradstreet New Zealand general manager John Scott said these figures showed a country battling to emerge not only from the global financial crisis but from a spate of natural disasters.

All New Zealand industries bar forestry and the electricity, gas and sanitary services sectors experienced some deterioration of payment terms in the year to March, when no industry managed to maintain an average trade payment rate of less than 39 days, well over the standard 30-day invoicing period.

Christchurch was the worst performer of the country's three primary business districts, extending the average length of account payments by three days, to peak at 47 days, compared with a 12-month low of 42 days just six months earlier.

Public administration at 51.1 days, communications (49.7 days), electricity, gas and sanitary services (48.7), manufacturing (48.4) and construction (48.3) were the sectors taking the longest to pay outstanding accounts in the March quarter.

The country's best payers for the quarter were mining at 41 days, forestry (41.6 days), agriculture (42.6), finance, insurance and real estate (43.3) and transportation (43.5).

Mr Scott said the longer a sector took to pay its accounts, the more likely it was that sector was experiencing difficulties in a broader sense.

"No business will survive in the long term without strong cashflows, no matter how solid the revenue. This is an element of business many industries are clearly neglecting, usually at their own peril."

While both public and private sectors lengthened payment terms during the March quarter, public companies did so more than private companies, with an average of 47.3 and 45.9 days respectively.

 

 

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