New government funding is being given to services aimed at helping New Zealanders get out of debt in the wake of Covid-19.
Minister for Social Development Carmel Sepuloni Photo: RNZ /Dom Thomas
In late May, the Commission for Financial Capability found 40 percent of households were at risk of falling into financial hardship, with a third already in difficulty.
The funding boost of $4.3 million over two years is for the expansion of existing specialist debt services and to develop a national approach to address problem debt.
"Our services are expecting about 2000 people to get specialist debt support and about 1400 people to get no-interest and low-interest debt consolidation microfinance loans or help with variations to high-cost loans," Minister for Social Development Carmel Sepuloni said.
"A large number of New Zealanders have said that they are feeling some financial difficulty or concerns that they're exposed to financial shocks following Covid-19," she told Midday Report.
"This is one of the measures we can put in place to support whānau during what is an uncertain time for many" - Minister for Social Development Carmel Sepuloni
Sepuloni said debt was an issue for many families.
"So we need to put measures in place so they can access safe low- or no-interest loans to be able to get out of debt and out of that downward spiral that debt often leads to."
Today's announcement built on the extra $35m of funding rolled out for core Building Financial Capability (BFC) services - previously called budgeting services - announced at the end of May, she said.
Anyone with problem debt can access help through BFC services. At present, just over 41 percent of their clients are self-referred.
Minister for Commerce and Consumer Affairs Hon Kris Faafoi said even before Covid-19, New Zealanders had high household debt and very low savings.
"In the wake of Covid-19, 74 percent of households said they're in financial difficulty, or exposed to financial shocks. By being proactive and ensuring services are in place by the end of this year to support those experiencing overwhelming debt issues, services are removing opportunities for unsafe lenders to put those vulnerable people into even worse situations."
Sepuloni added that as well as funding problem debt support, the Ministry of Social Development would engage with providers in diverse communities, including Māori, Pacific and other ethnic groups, to design a comprehensive national debt solution.