With an annual growth rate of 4.9%, lending to the business sector is at its highest point since the Reserve Bank began recording it in 1998.<\/p>\n
BusinessNZ chief economist John Pask said rising business debt was an indicator of an economy coming out of a long period of reasonably static growth.<\/p>\n
\u201cWhile lending levels are not necessarily related to economic growth over the short term, it is a positive step forward as business confidence continues to improve, despite geopolitical risks around the world,\u201d Pask said.<\/p>\n
\u201cRecent economic data for a range of sectors shows improving economic growth in areas like tourism, agriculture, and manufacturing, as reflected in the recent BNZ-BusinessNZ Performance of Manufacturing Index (PMI). <\/p>\n
\u201cAll of this points to continued growth as businesses move to expand production over coming quarters. Increased levels of debt are part and parcel of this reality.\u201d<\/p>\n
Nation of Debt. Illustration \/ Paul Slater<\/p>\n
Pask said the improved economic outlook would be responsible for some upward movement in lending, but argued other policy factors were likely responsible for increased investment over the past year, including the Government\u2019s Investment Boost \u2013 launched in last year\u2019s Budget.<\/p>\n
However, he acknowledged mixed views in the business community on whether this has resulted in new investment being undertaken or brought forward because of the policy.<\/p>\n
Tax debt and defaults<\/p>\n
While those with the capacity to take on debt appear to be on the up, small to medium businesses, particularly those in the construction, retail and hospitality industries, continue to face tough choices.<\/p>\n
The May 2026 Centrix Credit Indicator report showed business credit demand declined by 3.6% year-on-year, although current activity remained broadly consistent with longer-term trends.<\/p>\n
On an industry basis, hospitality credit demand had increased 22% over the year to May, agriculture up 13% and wholesale up 5%.<\/p>\n
While business credit defaults are trending downward \u2013 falling 14% year-on-year to May \u2013 company liquidations remained elevated, rising 17% overall.<\/p>\n
Centrix said the divergence highlighted improving repayment behaviour among active companies, even as business closures continue to reflect the lagged impact of economic pressure.<\/p>\n
Centrix general manager of analytics Stuart Baxter said a modest increase in credit defaults in recent months reflected the slower-than-expected economic recovery.<\/p>\n
\u201cWhile default levels have improved on a year-on-year basis, they remain elevated relative to the levels observed during 2023 and earlier, indicating that business financial stress remains above historical norms,\u201d Baxter said.<\/p>\n
For businesses unable to pay their debts, many have turned to insolvency and liquidation.<\/p>\n
According to the Ministry of Business, Innovation and Employment (MBIE), 3275 businesses were placed into liquidation between May 2025 and May 2026, up 13.5% year-on-year.<\/p>\n
It\u2019s a trend that has steadily grown year-on-year since 2021, as a result of rising costs, lower consumer and business confidence, and persistent economic shocks.<\/p>\n
On top of those pressures, the Government has given the Inland Revenue Department (IRD) more funding to crack down on those who owe tax.<\/p>\n
Latest IRD figures showed total overdue tax and entitlements debt had reached $ 9.4 billion as of March 31, 2026, with 556,000 customers in debt.<\/p>\n
The majority of that figure, about 75%, is debt owed to the IRD by businesses.<\/p>\n
Of that $9.4b, $3.6b was owed by \u201cmicro-businesses\u201d, $2.5b by small-to-medium enterprises, and another $968 million owed by significant enterprises.<\/p>\n
By tax type, $2b was owed under employer activities (obligations or deductions like PAYE), with another $3.4b owed in goods and services tax (GST).<\/p>\n
GST and employer obligations account for 57% of the overall debt despite these being taxes businesses must collect and pass on to the Government.<\/p>\n
Roughly a third of all debt owed to IRD is interest and penalties, with $100m under an active repayment plan.<\/p>\n
The IRD has also ramped up debt collection measures in recent years to claw back the $748m lent to businesses through the Small Business Cashflow Scheme (SBCS) during the Covid-19 pandemic.<\/p>\n
Fixity director and licensed insolvency practitioner Larissa Logan.<\/p>\n
Fixity director and licensed insolvency practitioner Larissa Logan said the IRD had taken a relaxed stance towards debt collection pre-Covid, but had since strengthened its enforcement, leaving businesses to catch up with the status quo.<\/p>\n
\u201cI think the IRD need to enforce and they have a right to collect. That\u2019s tax that\u2019s owed, and it\u2019s going to help this economy whether it\u2019s for roading, health, schooling etc.,\u201d Logan said.<\/p>\n
\u201cIt\u2019s a shock to some businesses who have been using IRD as a working capital funder for a long period of time, but also it\u2019s happening at the absolute worst possible time in an economy which is so impacted by offshore challenges.\u201d<\/p>\n
Logan said businesses coming to her were evaluating all options, including turning to second-tier financiers, which she believed were on the rise.<\/p>\n
\u201cWhenever I see one of those financiers on the personal property securities register (PPSR), I know [the business is] in trouble because if you don\u2019t pay, they enforce a lot quicker than the mainstream banks.<\/p>\n
\u201cBy the time you\u2019re in that position where you can\u2019t pay the IRD and you\u2019re trying to get second-tier lending at really expensive interest rates, it\u2019s just a spiral down. It\u2019s just how long can you last.\u201d<\/p>\n
COMING UP IN THE SERIES<\/p>\n
Monday: NZ debt nears $1 trillion, but borrowing growth has slowed sharply<\/a><\/p>\n Wednesday: Housing debt<\/p>\n Thursday: Government debt<\/p>\n