Fewer New Zealanders Borrowing as Food, Fuel, Credit Costs Rise

By Tracy Withers

July 16 (Bloomberg) -- Fewer New Zealand consumers applied for loans in the first half of the year amid rising fuel, food and credit costs, according to a report from the nation's biggest credit-checking company.

Applications for personal loans fell 16 percent in the six months ended June 30 from a year earlier, Veda Advantage Ltd. said in a statement e-mailed to Bloomberg News. Hire purchase applications fell 9.5 percent and consumer credit enquiries declined 10 percent, the Sydney-based company said.

Fewer consumers are borrowing to buy homes, cars and household appliances, adding to signs the economy was in recession in the first half of 2008. Second-quarter consumer confidence fell to a 17-year low as gasoline prices jumped 27 percent from a year earlier.

``Households are having to contend with steep rises in living costs, which has led to a decline in purchases of big- ticket goods that typically require hire purchases and personal loans,'' said Veda's New Zealand director John Roberts.

First-half home loan applications slumped 21 percent from a year earlier, Veda said. Applications fell 10 percent in June from May.

``Things look quite bleak for the property market,'' said Roberts. ``The reality is that things are likely to get worse before they get better.''

Sales of New Zealand houses slumped for a fourth straight month in June to a 16-year low, according to the Real Estate Institute. Prices are falling and buyers are staying out of the market, realtors say.

About 7 percent more consumers are defaulting on loans, hire purchases or bills for telephone and Internet services, Roberts said.

New Zealand's economy contracted 0.3 percent in the first quarter. At least eight of 13 economists surveyed by Bloomberg News expect it also shrank in the three months ended June 30, putting New Zealand in its first recession since 1998.

To contact the reporter on this story: Tracy Withers in Wellington at twithers@bloomberg.net.