The Tauranga Budget Advisory Service's November report shows its clients had a collective total of $48.153m in debt. Photo / Getty
Tauranga residents seeking budget advice have accumulated more than $48 million in debt as the impact of the Covid-19 pandemic and rising living costs are felt in the Bay of Plenty.
But bank spokespeople say average credit card and personal loan balances have fallen in the last year.
The Tauranga Budget Advisory Service's November report showed its clients had a collective total of $48.153m in debt.
This was an almost $13m increase on the debt reported for the same month last year and close to $4m more than the total debt recorded by the service in June.
More than $38m or 79 per cent of the debt was owed to banks, finance companies or other consumer lenders. Almost 12 per cent was owed to Government departments or agencies.
Tauranga Budget Advisory Service manager Shirley McCombe said while there had been a lot of focus on Covid-19, the rising cost of living was more of an issue for her clients.
"Inflation is increasing but wages have not increased to meet the cost of living," McCombe told the Bay of Plenty Times Weekend.
"I'm very concerned about the next six months. We don't know exactly how rapidly Covid-19 will spread as the borders open or what impact this will have."
McCombe said many families were already struggling, some because of the ever-increasing cost of living, some because of lost income, some because of the impacts of vaccine mandates.
"The increasing level of debt raises concern that clients are using debt to cover [the] day to day cost of living."
McCombe said she was particularly concerned to see the service's clients collectively owed about $9m to finance companies and a little more than $58,000 to buy now, pay later providers.
A Westpac New Zealand spokesperson said customers' average credit card and personal loan balances had dropped in the past 12 months.
"Mortgage borrowings have increased with higher house prices, but we're pleased to see a higher proportion of Westpac home loan customers are ahead on their mortgage repayments than they were the same time 12 months ago.
'"We take into account several factors when considering lending applications to ensure customers can make repayments."
An ANZ spokesperson agreed customers' average debt was decreasing.
"Both ANZ and industry data we have seen show that demand for personal loans and credit cards has reduced over the past 12 months.
"In addition, some customers have been able to utilise the Covid-19 lockdowns to repay outstanding debt."
This comes as the economy continues to feel the effects of the pandemic and there continue to be active community cases of Covid-19 in the region.
Priority One's Economic Monitor report published in September estimated the latest lockdown led to a loss of $35m.
Retail spend in the Western Bay of Plenty fell by 50 per cent in alert level 4.
During the same period spending on home and recreation, clothing and footwear and hospitality plummeted to zero, while food and liquor spend increased by 25 per cent and fuel halved.
Priority One's report noted fears around a resurgence of the virus, economic conditions, and disconnecting from family and friends were still prevalent among New Zealanders.
"However, concern towards community events and activities being cancelled is increasing."
The report identified food security as the greatest lockdown issue in the social sector.
Tauranga Foodbank gained 114 new clients in August. In the same month, 569 food parcels were distributed, making up 20,664 meals.
The report also noted existing challenges around increased cost of living, including rental affordability, food, petrol and utility costs.
"Many people are still recovering from the last lockdown and any reserves they had are now gone," the report stated.
Priority One's December report recorded 521 food parcels being distributed in November.
The December report also noted how the challenges of the increased cost of living drove demand for budget advisory services.
The report said the Tauranga Budget Advisory Service was consistently providing around 400 sessions per month, with exactly 394 sessions occurring in November alone.
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Meanwhile, Rotorua Budget Advisory Service general manager Pakanui Tuhura said the service's clients had a collective total average of $15m of total debt over the past three years.
"I don't think these numbers can be linked to the lockdowns," Tuhura said.
"We believe more people could benefit from our services."
Tuhura said there had been no noticeable increase in demand for the service in the past six months.
"I don't know the reason for that."
• Pay off the debt with the highest interest first – you may find these are your store cards and hire purchase items.
• Pay off the debts you won't incur again – like any high-interest car finance.
• Take quick wins – pay off the debt with the smallest balance, it's one less debt to worry about.
• Remember, you may still have to keep paying minimum monthly or fortnightly repayments on any outstanding debt.
• Rolling all your debts into one easy to manage loan could make sense. Just one monthly or fortnightly payment is easier to manage and you could save money by paying less interest.
• Marking your 'debt free' date on the calendar is a powerful way to stay on track.
• Create a budget and track your spending.
Source: ASB Bank