It all sounds bad. But while they are big numbers, it is important to view them in a historical context.
When it comes to those people falling behind on mortgage payments, we are only just approaching the most recent peak in 2019. In other words, you could make the case that normal service is still resuming after a period of unusually low interest rates.
When it comes to those behind on consumer payments, things look a little worse. But the numbers are still just back to 2017 levels - not a particularly memorable period for economic doom and gloom.
This is heartening and certainly, a sign that the economy has held up well in the face of rapidly rising interest rates across the past 18 months.
The relatively low levels of distress - particularly mortgage holders - no doubt have plenty to do with the fact that unemployment has stayed relatively low (with the official rate still sitting at 4 per cent).
As long as people are employed then lenders are going to work with them to restructure payments and keep mortgages (and hire purchase or credit agreements) ticking over.
It’s not in their interest to see these distressed borrower figures rise.
Unfortunately, they are almost certainly going to keep rising. And the rate at which they are accelerating is quite alarming.
The brutal reality is that the full impact of high interest rates is only just starting to hit the economy.
We can assume that intuitively because 85 per cent of Kiwi mortgage-holders are on fixed terms, which means it takes at least six months, but generally longer, for the higher interest pain to flow through.
In Australia - where most people are on floating rates - you’d expect monetary policy to work faster.
The Reserve Bank (RBNZ) has also done good work on the topic very recently. In the November Monetary Policy Statement they published updated estimates showing that “the OCR typically takes six to nine quarters to reach its peak impulse on annual inflation”.
That’s economist language for: up to two and a quarter years to deliver its full payload of pain and remove demand from the economy.
The RBNZ began hiking in October 2021, which means the full effect of hikes only started to pass through to the economy in January this year.
Suddenly we’re all feeling it and the real battle of attrition has begun.
From now, we should expect to see the pressure build on the economy - unemployment will rise and so too, sadly, will those distressed credit numbers.
