Consumer arrears are up 3.1 percent and mortgage arrears up 10 percent. File photo. Photo: RNZ / Michelle Tiang
New Zealand's economy appears to be heading in the right direction - but a new Centrix report paints a more challenging picture for indebted consumers and businesses.
Overall consumer arrears and mortgage arrears are up year-on-year, says Centrix managing director Keith McLauchlan.
He says the November data suggests many people are struggling with debt, which was making it difficult for businesses to manage.
Consumer arrears were up 3.1 percent and mortgage arrears up 10 percent in November on the year earlier and are expected to continue to rise over the coming months, in line with seasonal trends.
"In the run-up to Christmas and peak spending season, consumer credit demand is on the rise, with increased demand for buy-now-pay-later services and personal loans observed in recent weeks," McLauchlan said.
"While the overall rate of growth for financial hardship cases is easing, we're still seeing them up significantly year-on-year.
"This ties in with the recent reports of record KiwiSaver withdrawals in October for financial hardship reasons."
He said last month's 50-basis-point cut to the Reserve Bank's official cash rate would provide respite for some households, but the affect would not be immediate for those locked into higher interest rates loans.
He said many businesses were also struggling, with credit defaults up 16 percent on average, with the construction sector most affected with a 38 percent increase, and transport industries up 35 percent.
Company liquidations were up 27 percent year-on-year, with wholesale trade sector company liquidations up 82 percent.
"On the business front, we really are seeing a tightening of business economy," he said.
"We are expecting a continuation of the increase of company closures and liquidations that we've seen over the last three to four months."
He said South Island businesses were less impacted by closures than the North Island.
"It tends to be areas that you would expect, perhaps central North Island, some areas on the eastern coast of the North Island, the areas where you would expect difficulty if there are closures or layoffs in those areas."
He said the weak labour market was also having an affect on discretionary spending.
"Those that haven't been impacted by the interest rates, or less so by the cost of living, have still held back on their spending... and that's had a flow on impact to businesses.
"So if you run a cafe or a building company, if you sell motor vehicles, consumers have pulled back on the discretionary spending in those areas, which means a business have suffered from a drop off in cash flow, which had an impact on their ability to continue to trade."
He said debt arrears were expected to increase in the new year along with business closures.
"Traditionally, we tend to find that arrears increase post-Christmas, and that's really a result of additional costs, such as children returning to school.
"Some businesses close down at Christmas because they've just made it through to Christmas and can't face the new year.
"In particular, grocery, machinery and equipment, motor vehicle, and furniture wholesaling businesses have seen a significant rise in insolvencies in recent months," he said.
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