The debt situation has slightly improved, but more consumers are still behind on their power bills. File photo. Photo: Kelly Sikema / Unsplash
The country's debt burden is stabilising, but consumers are faring better than businesses, according to new data.
The latest report from credit bureau Centrix for June showed a slight improvement in the number of people in arrears, falling 9000 to 465,000 on the month before, although were still up 9 percent on a year ago.
"Consumer arrears are not materially deteriorating, with only marginal increases and decreases noted from month to month," managing director Keith McLaughlin said.
But he said there were pockets of distress.
Mortgage repayment arrears were marginally lower at 21,500, although the number in financial hardship has risen by close to 28 percent in the past year to 13,500 - and nearly half of those were because of people struggling to meet mortgage repayments.
"[This is] indicating more borrowers are seriously falling behind on their debt repayments," McLaughlin said.
The level of hardship for people was also showing through in credit applications enquiries with financial hardship alerts rising to 0.5 percent for the first time since August 2020, and there was an increase in court judgements involving debt..
Consumer credit demand was flat on a year ago, although consumer switching among power companies lifted credit check demand 10 percent, while the slide in electric vehicle sales meant loan demand fell by nearly a quarter.
Tougher for business
McLaughlin said the business sector appeared to be doing it tougher because of the challenging economic conditions, with liquidations growing 19 percent year-on-year, and the construction and property industries particularly badly hit.
The property sector had the highest quarterly total of company liquidations in more than 10 years, a rise of 28 percent.
"These figures indicate continuing weak consumer demand paired with a struggling New Zealand economy, which is hitting our businesses' bottom line hard."
McLaughlin said consumers were doing better than businesses, with an overall stabilisation of arrears.
"Businesses, on the other hand, have experienced marked challenges, with the recent raft of liquidations indicating trouble experienced over a sustained period.
He said the prospect of interest rate cuts from the Reserve Bank, the freeing up of lending rules, and just implemented tax cuts offered a positive outlook, which if it flowed through to consumer spending would be a boost for business.
However, McLaughlin said the next few months would remain a challenge.