Source: Radio New Zealand
An improving economy has helped to reduce household debt levels. RNZ / Quin Tauetau
- Consumer debt arrears fall, but more in deeper distress
- Consumer credit demand softens a shade, but up on year ago
- Business credit demand subdued, but service and agriculture show strength
- Business liquidations in February highest in 17 years
Low interest rates and an improving economy helped to reduce household debt levels, while stoking an increase in credit demand.
Credit reporting agency Centrix’s latest report showed 473,000 people, about 12.1 percent of borrowers, were behind in their debt repayments, a drop of 18,000 on January and down more than 2 percent on a year ago.
Chief operating officer Monika Lacey said the report was before the outbreak of hostilities in the Middle East, which would add uncertainty to the outlook.
“Consumer credit demand has softened in recent weeks, but remains above last year’s levels, while new household lending has lifted strongly. At the same time, overall arrears have improved, reflecting improved financial resilience for many households compared with a year ago.”
However, 97,000 were in arrears for 90 days or longer, the highest level since July 2023, which Lacey said showed pockets of deep financial distress.
Lower rates pushes credit demand
Centrix chief operating officer Monika Lacey. Supplied
Overall credit demand was up more than 5 percent, led by new mortgage lending, up 15 percent on a year ago, with personal loan demand up 13 percent, while credit card demand fell.
Lacey said demand had softened in recent weeks and that might reflect caution among businesses and households.
“I think the Middle East crisis is already starting to put pressure on already stressed pockets, and consumer demand has softened and consumers are not out there actively applying for credit as they were a few weeks ago.”
She said it was too early to guess whether the conflict would materially add to business and household financial distress.
Business credit demand was subdued, being 2 percent below a year ago, with hospitality businesses to the fore but solid growth from agricultural firms as well.
Business liquidations highest in 15 years
Meanwhile, business liquidations for the month were the highest since 2009 led by construction and hospitality, with Inland Revenue’s aggressive enforcement of arrears a key factor.
Company liquidations rose to 2994 in the year ended February, up 14 percent on the year before, last year, with 70 percent of those liquidations stemming from Inland Revenue action on tax debt.
“There’s that long tail of tidy-up from the Covid era … which is important to do because those businesses arguably are trading in not a very good state and we want to tidy that up and make sure they’re not taking other businesses down with them.”
Lacey said construction was the leading contributor to business liquidations followed by hospitality.
She reiterated that households and businesses finding themselves under financial pressure should make contact with their lenders as soon as possible.
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
