Credit trends are improving, though the number of company liquidations remain high as tax debt collection has intensified following a more lenient approach taken during the Covid years.
Credit reporting service Centrix said there was a 12% drop in the number of customers with debt arrears in August over July, or 1.8% on the year earlier.
"Consumer arrears, year on year have improved, and that's a trend which is good. And if we start to see consumer sentiment improve, then that should flow through into businesses which will be a really positive outcome for New Zealanders," Centrix chief operating officer Monika Lacey said.
Credit demand was strengthening, with consumer credit demand up 5.6% on last year, led by strong growth in personal loan applications, which was at the highest highest level since December 2024.
"Notably, 90+ day delinquencies have now fallen for the fourth consecutive month, and mortgage enquiries rose 10.6%, largely driven by increased refinancing activity," she said.
However, company insolvencies remained high and accounted for nearly 70% of all liquidation applications, compared with between 30% - and 40% during the Covid years.
She said the increase reflected the low level of arrears recorded during the Covid era, as the credit sector softened its approach to chasing bad debts.
"So the liquidation activity that we're seeing, whether it's related to IRD or not, is what we would call a lag indicator."
She said the lag had a long tail and expected it would take time for the current level of arrears to wind its way through the system.
"While challenges remain and the economy is still operating below potential, the improvement in arrears, strengthening mortgage performance, and rising credit demand all suggest consumers and businesses could be beginning to regain confidence, offering some hope of a more positive outlook for New Zealand's credit markets," she said.
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Business conditions were also showing signs of signs of improvement, even with company liquidations up 26% on last year.
"The rate of increase has eased in recent months, and sectors such as agriculture, mining, and information media are now showing improving liquidation trends.
"Credit defaults are declining in construction, retail, and transportation, reflecting early signs of economic recovery."
Consumer credit arrears were below the national average throughout the South Island, with the biggest increases seen in Wairoa (17.4%), Kawerau (17%), Gisborne (16%), South Waikato (16%), Ruapehu (16%), Ōpōtiki(16%), Waitomo (16%), Rotorua (15%), and the Far North Districts (14%), as well as Porirua City (15%).
Still, financial hardship cases declined, with volumes falling over the past couple of months from the November 2022 peak.
"Proportionally, 44% of hardships relate to mortgage payment difficulties, with a further 29% related to credit card debt.
"Personal loan hardships are up 36% year-on-year, accounting for 19% of all hardship cases."
By Nona Pelletier of rnz.co.nz
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