I’ve heard a few people say recently that they are sick of hearing about credit crunches and market meltdowns. Not me. I can’t get enough of it.
The New Zealand Herald last week reported a survey by advertising agency M&C Saatchi which found we had a brighter view of the economy than most. Only 25% of us feel pessimistic compared with 36% of Australians and 64% of Britons.
Well, I guess that depends on the day you ask the questions. What is so striking about the current turmoil is that “turmoil” is exactly the right word to describe it. The market slumped and a number of banks went bankrupt, then there was a rescue package and the markets lifted, then they slumped again and, at the time of writing, there was another rally underway.
My memories of the Crash of ’87 are that the market fell. That was it. It was all over and everybody knew it. Work on some building sites stopped within days and Auckland still bears the scars, in Shortland Street where the old Auckland Star building remains a carpark and in Victoria Street, where the Royal International Hotel (the place where I discovered booze) used to be and which now boasts another carpark and a vertical bungy jump.
Despite the volatility, there are some indicators out there, though, that suggest this is the real thing.
Credit reporting company Veda Advantage reported a 24% year-on-year surge in consumer debt defaults in September. The company’s New Zealand director, John Roberts, says it is not clear whether this was a one-off or the start of a trend.
In Australia Veda Advantage reports that businesses credit enquiries plummeted in the same quarter, falling by 6% year-on-year. But get this: credit enquiries fell 2.6% in July, 6.3% in August and 9.5% in September. That looks like a trend to me. Especially as it follows a 2.4% decrease in business credit enquiries in the June quarter, and a 7% fall in the number of business credit applications in the March quarter.
CEO Rory Matthews says the fall in commercial credit applications indicates that businesses, like consumers, are feeling the impact of current market volatility and are wary of taking on more debt.
The other night I was out with a couple of start-up entrepreneurs (Quote: “When are we going to stop being a start-up?”) old enough to remember the dot-com bust, the Asian crisis and, yes, ’87. One of them said the biggest mistake he made during the dot-com bust was “not cutting back hard enough”. He didn’t intend to make the same mistake again.
That’s what I intend to do, in my own way, albeit on a much smaller scale. This week I’ve resolved to brew my own beer, to put a mobile phone block on my landline to stop my daughter gabbing at my expense, and I’ve downgraded my Telecom broadband plan. Telecom recently doubled my data cap, so I’ve gone back to the cap I had before, saving $10 a month.
It’s not much, but it’s a start.