With 478,000 people behind on payments and hospitality businesses more than two times likely to fail than other businesses, New Zealand’s households and businesses continue to navigate economic uncertainty, credit bureau Centrix says.

When it comes to households, the latest Centrix Credit Indicator report shows a slight year-on-year decrease in the number of people behind on payments.  

In the June quarter, 478,000 people were behind on payments – down 7000 from May, Centrix says. 

Wairoa District and Kawerau District were areas with the highest rates of people behind on payments. Meanwhile Tasman District and Nelson City had the lowest rates of people behind on payments.  

With figures on the number of people behind on payments largely unchanged from a year ago, Centrix says this begs the question: “Is the trend of year on year arrears improvement coming to an end?”

Financial hardship

There are nearly 14,450 accounts reported in financial hardship, Centrix says. 

While the rate of increase has eased in recent months (there was a drop of 550 accounts in the last month), Centrix says the number of accounts in financial hardship is up 7.1% year on year. 

“Almost half (45%) of hardship cases relate to mortgage payment difficulties, which are up 7% year on year.”

Credit card debt at 29% and personal loan repayments at 18% make up the rest of the financial hardship cases.

Financial hardship cases have been generally rising since November 2022 and in the June quarter, people aged between 35 and 49 had the highest rate of financial hardship.

Vehicles, credit cards, retail energy and communications arrears

The number of people behind on their vehicle loans, credit card payments, retail energy and communications (things like mobile and broadband) has gone down, Centrix data shows. 

Vehicle loan arrears were at 5.4% in June, slightly below the level recorded a year ago. 

Centrix says credit card arrears had improved to 3.9% in June, the first time they have gone below 4% since September 2022. They are down 6% compared to a year ago.

The proportion of households behind on their retail energy payments was the lowest level since July 2023 – falling to 3.7% in June. 

Communications accounts fell to 10.6% but this is 6% higher than the same time last year, according to Centrix. 

Personal loans

Personal loans were at 9.3% and Buy Now Pay Later arrears fell to 8.4% in the June quarter.

Personal loans that were at least 30 days past due had improved in June at 5.6%, but this is higher than in June last year which was 4.8%. 

People’s credit scores are between 1 and 1000 – it reflects how likely you are to pay bills on time. The higher the number, the better your credit rating is.  

Nine out of 10 personal loans were granted to borrowers with a Centrix credit score of 505 or higher. This credit score is up from 450 at the start of 2020. 

Centrix’s managing director Keith McLaughlin says; “this shift underscores the impact of the Credit Contracts and Consumer Finance Act and ongoing economic pressures, prompting lenders to maintain tighter credit policies”.

New lending for things like credit cards, vehicles, personal loans and Buy Now Pay Later was up 5.5% year-on-year with Centrix saying this was driven by increased activity in personal loans and vehicle finance in recent months. 

New household lending is up 19.9% year-on-year. 

Hospitality businesses increasingly vulnerable

New Zealand’s hospitality sector is fast becoming one of the most vulnerable industries, Centrix says.  

“Hospitality businesses are more than two times likely to fail as the typical New Zealand business,” the credit bureau says, with cafes, restaurants, pubs and clubs particularly at risk. 

Over the last year 288 hospitality companies were placed into liquidation – up from 199 in the same period last year. 

“That is a clear sign that the industry continues to struggle with rising operating costs and shifting consumer spending patterns.”

This also put the hospitality sector in a new spot – overtaking the property sector as the second-largest industry contributing to company liquidations.

Company liquidations up but growth easing

Overall, company liquidations are up 26% year-on-year but the rate of this growth continues to ease, Centrix says. 

“The number of liquidations are partly due to increased enforcement activity by the Inland Revenue Department.”

The construction industry remains in the top spot when it comes to contributing to company liquidations, with 755 construction companies liquidated in the past year. This is an increase of 48% compared to the previous year, Centrix says. 

“This continues to be a challenging environment for small to medium enterprises, with elevated stress across multiple sectors.”

Centrix says small businesses are “facing elevated levels of mortgage stress, with sole proprietors experiencing more than double the debt stress of non-business owners”. 

And when it comes to business credit defaults, they have increased across all business sectors year-on-year.

Centrix says this is sitting at 13% overall with the worst impacted industries manufacturing, property/rental, construction, transport, hospitality and retail trade.

Business credit demand is also up 8% year-on-year.

“Credit demand has increased by 23% in the retail trade and hospitality sectors over the past year, with financial/insurance and arts/recreation services up 22%,” Centrix says.