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Millions default on bills as lockdown legacy bites

Nicole Pedersen-McKinnon
·3-min read
Millions default on as lockdown bites. Source: Getty
Millions default on as lockdown bites. Source: Getty

How much has the near-three-month lockdown hurt? We now know that one-in-four Aussie households have already been forced to put off paying one or more bills.

That’s a staggering 2.2 million bills that have gone unpaid so far, according to research given exclusively to Yahoo Finance, by Finder.

The bill most often breaking the bank is electricity, with an outstanding amount of $381million alone.

That’s based on one-in-10 electricity account holders pausing their payments because loss of income means they can’t afford them. Australian Bureau of Statistics data show there are 9.9million dwellings in Australia and Finder research places the average quarterly energy bill at $385.

Meanwhile, estimated unpaid mobile phone bills total $79million, while car owners have $755million in premiums waiting for payment.

The research shows 7 percent of Aussies have put off paying a gas bill, while 6 percent couldn’t afford to pay their latest council rates.

And water bills (6 percent), credit card bills (6 percent) and mobile phone accounts (5 percent) all remain in the red.

Who is feeling the pain most?

Earnings are obviously essential to meeting expenses, so it’s logical anyone who has seen these fall has struggled to pay bills. Forecasts now that restrictions are easing are for the unemployment rate to peak at 8 percent.

But the younger the person, the more in income peril.

The survey reveals that more Millennials than any other generation have deferred paying a bill, with this group disproportionately impacted by the pandemic-induced job losses because they are more likely to work in, for example, hospitality and retail.

More than a third (36 percent) of those aged 26-39 have deferred a bill, compared to just 6 percent of baby boomers.

Interestingly, men (27 percent) are far more likely than women (19 percent) to have deferred a payment.

Equally, city dwellers are more likely than regional Aussies – 25 percent versus 18 percent – to have taken a bill break.

As Kate Browne, personal finance expert at Finder, commented: “COVID-19 has shown that financial stress can befall anyone and millions of dollars in bills are being racked up as we speak.

Will there be credit score damage?

The broad answer is no.

With debts, the Australian Bankers’ Association has decreed that repayment holidays of up to six months will not affect your credit score. Institutions will usually record that a repayment has been made on time (they need to complete this new field every month under comprehensive credit reporting).

What’s crucial is that you were up-to-date with repayments before we became a COVID economy.

With non-debt repayments the situation will vary, but monthly repayment history for such bills is not included on credit reports.

However, it is important to double check that a provider will not list a bill as a default.

The Financial Rights Centre has called on these utilities and telcos, where they offer bill leniency, to guarantee it won’t affect credit records.

What to do if you can’t pay a bill

It’s probably the last thing you want to do but the first thing to do if you can’t pay a bill is contact your provider.

They will have a designated hardship department that will look to put an agreement in place for a bill holiday or reduced repayment schedule. Without this agreement, unpaid bills will eventually fall into the hands of debt collectors that will take action against you.

“Consumers could also be putting themselves at great risk if they let insurances become void due to the premiums going unpaid,” Finder’s Browne adds.

Tread carefully as the recovery takes shape.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at Follow Nicole on Facebook, Twitter and Instagram.

Yahoo Finance Breakfast Club Episode 6. Source: Supplied
Yahoo Finance Breakfast Club Episode 6. Source: Supplied

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