Strain felt across key sectors even with cooling inflation
New Zealand is facing steady but challenging trends in consumer and business credit as the holiday season draws near, according to Centrix’s October Credit Indicator report.
Although inflation in New Zealand dropped to 2.2% in the third quarter of 2024, well within the Reserve Bank's 1-3% target, household arrears remain high. As of last month, 458,000 individuals were behind on payments—a figure that, while slightly down from the previous month, remains 3.5% higher than the same time last year.
“Although these movements point to economic optimism on the horizon, credit insights from the last month reveal a bumpier road ahead for consumers and businesses across the country,” Centrix managing director Keith McLaughlin said.
On the consumer front, the report highlights that approximately 458,000 New Zealanders are currently behind on payments, a slight decrease of 3,000 from the previous month but still 3.5% higher than last year.
Mortgage arrears have risen by 13% year-on-year, with 21,200 loans now overdue. At the same time, mortgage applications have seen a 4% uptick, hinting at cautious optimism in the housing market. Consumer credit demand overall fell by 2% from last year, but credit card inquiries rose by 13%, showing a recovery in consumer interest for short-term credit options.
However, financial stress is not limited to individual consumers. The report reveals an increase in credit defaults across business sectors, with an average rise of 16% year-on-year.
"Turning to the business credit side of things, a sombre picture emerges," McLaughlin said, citing an especially high impact on transport and construction, with defaults rising 35% and 33%, respectively.
The hospitality industry has also taken a substantial hit, seeing a 34% surge in company liquidations over the past year, with cafes, restaurants, and pubs particularly affected. In total, business liquidations are up 25%, reaching the highest monthly count in a decade.
Centrix’s findings revealed that New Zealand’s credit environment remains tenuous. McLaughlin emphasised that with seasonal spending on the horizon, “it’s therefore imperative that both businesses and consumers plan for these challenging times, taking stock of where they’re currently at and seeking advice from trusted advisors where needed.”
