Credit card applications are up 5 percent on last year, but are still 40 percent down on 2019 levels. Photo: 123RF
Demand for consumer credit continues to fall, with business liquidations on the rise.
The latest report by credit bureau Centrix also indicates an improvement in the number of consumer arrears in July, though demand for credit was down 3 percent on the year earlier, along with a 22 percent drop in new car loans.
"There is a drop off in discretionary spending, so things that aren't required, such as motor vehicles, have really slowed down as far as consumer demand is concerned. They're just not spending money," Centrix managing director Keith McLaughlin said.
He said the Reserve Bank's 25-basis-point cut to the official cash rate last month had sparked a round of interest rate cuts and a reprieve for households struggling with debt.
Credit card applications were up 5 percent on the year earlier, but still 40 percent down on 2019 levels. Mortgage applications were down 1.5 percent on last year.
"It's clear Kiwis are still struggling in the face of the ongoing cost-of-living crisis, with financial hardship cases up 27 percent, sitting at 13,850 for July," McLaughlin said.
"In saying this, it is positive to see so many consumers taking responsible steps to deal with their financial struggles, before they find themselves in a bad debt emergency.
"The household budget is being adjusted to take account of the current economic environment."
But he said the cutback in spending was having a knock-on effect with the number of business liquidations on the rise.
Business liquidations rose in the second quarter with Auckland accounting for 383 liquidations, followed by the rest of the North Island with 174 liquidations and the South Island at 85.
"Over the past year, the manufacturing sector has been particularly impacted, and has seen a 15 percent rise in liquidations, with furniture and fabricated metal manufacturers suffering the most," McLaughlin said.
"This trend points to signs the industry is facing continual challenges with falling new orders and low production as domestic demand remains weak.
"As we move into the warmer months, it's clear challenges will likely persist for both New Zealand consumers and businesses."
McLaughlin said people struggling with debt should contact their lenders and seek financial advice.