Reduced arrears: A positive sign for NZ economy
After enduring one of its toughest economic downturns in decades, New Zealand is showing signs of recovery.
Keith McLaughlin (pictured), managing director at Centrix, highlighted the latest national economic data indicating that the country likely exited the recession by the end of last year.
“Looking at the latest New Zealand credit insights, green shoots of optimism can be observed,” McLaughlin said.
A key positive sign includes an 11,000 decrease in consumers in arrears month-on-month, suggesting a tentative improvement in the credit cycle.
Mortgage sector stabilises
Following recent RBNZ rate cuts that lowered mortgage rates, the mortgage sector saw improvements with a 400 decrease in past due mortgages, now totalling 23,000.
This marks a stabilisation in early arrears, complemented by a 22% increase in new mortgage lending year-on-year.
Consumer credit demand has also remained steady through the first quarter of 2025, with mortgage applications for new homes up by 13% compared to last year.
Additionally, there has been a notable rise in credit card applications, retail energy, and personal loans.
Challenges in financial hardship
Despite the overall easing trend, financial hardship cases are still up by 16% year-on-year.
This indicates ongoing economic pressure but also shows that more individuals are proactively addressing financial challenges with their lenders.
As the country recovers from a recession, many New Zealanders continue to face significant financial difficulties. A BNZ survey revealed that nearly half of the respondents experienced substantial financial pressures at the start of the year, with 37% resorting to high-interest credit options like BNPL schemes to manage these pressures.
Defaults and liquidations surge
The business sector is experiencing mixed signals. While business credit defaults have increased by 18% across all sectors year-on-year, credit demand has grown by 6%.
The rate of company liquidations has escalated significantly, with a 37% increase year-on-year and a 23% rise month-on-month.
Sectors such as residential building construction, property operations, and food services are seeing the highest rates of liquidation, Centrix reported.
Agricultural sector showing resilience
Despite a 20% increase in liquidations year-on-year in the agriculture sector, there are signs of resilience among growers, dairy, and livestock farmers. This recovery is supported by strengthening export returns, which are helping to bolster the national economy.
