The amount of money New Zealanders have borrowed on credit cards and personal loans has fallen in the last year but nearly half a million people are behind on their payments.
Figures from the Reserve Bank show consumer debt fell from $14.6 billion in May 2024 to $14.52b in June 2025, a difference of just over $80 million.
Of that, bank consumer debt fell from $7.58b to $7.49b, while non-bank consumer debt rose just $4m from $7.02b to $7.024b.
Centrix managing director Keith McLaughlin said Kiwi households were managing their accounts a lot better this year.
“What we’ve noticed is that consumer arrears across all sectors, retail, energy, banking, credit card, buy now pay later, it’s about 470,000 New Zealanders who are currently in arrears,” McLaughlin said.
“But over the last 12 months, that’s stabilised at around about that level. We really saw a spike going back a couple of years ago where every year defaults and insolvencies climbed.”
Consumer arrears vary across the country according to the latest Centrix Credit Indicator Report, with arrears higher in the North Island compared to the South Island.
Tasman District had the lowest level of consumers in arrears at 8.2%, while Wairoa District had the highest at 18.12%.
McLaughlin said although past weather events like Cyclone Gabrielle and flooding are factors, he thinks the uplift in the primary industries and the closure of manufacturing businesses are central to the change.
A high milk price payout to dairy farmers has bolstered the rural economy.
“The first payments tend to go back to the lenders, back to the banks, because they’re carrying a fair bit of debt over the period.
“The second lot went to the IRD and I think it’s only now that the rural sector are going to have some disposable income, which hopefully will trickle down into the local economy.”
McLaughlin said the South Island was benefiting from lower unemployment, high agricultural gains and lower housing costs, resulting in smaller mortgages.
Financial hardship cases increased year-on-year for July, up 7.1%.
Almost half (45%) relate to cases of mortgage payment difficulties, with the remainder coming from credit card debt (29%) and personal loan repayments (18%).
The highest rate of financial hardship is among those aged between 35 and 49.
McLaughlin said households are balancing their budgets a lot better than in the past, and are not spending money on discretionary items as much as they used to.
He said buy-now-pay-later purchases and personal loan arrears were not increasing at levels like they were 18 months ago, with buy-now-pay-later arrears comprising about 8%-9% of borrowing.
While the situation is good for households, McLaughlin said it places pressure on small to medium-sized businesses that rely on discretionary spending.
“[Households are] saying ‘if we can’t afford it, we’re not going to do it now, we’re going to be conservative’. That’s had a flow-on impact to those small businesses.
“Small businesses rely on their household mortgages to finance their business. They’ve had increasing wages and other costs going up, they’ve had interest rates going up and they’ve had their sales going down because people aren’t spending the money.”
McLaughlin thinks the current economic climate is affecting more people than during the Global Financial Crisis (GFC) in 2008, and said although the GFC affected people who were invested in the sharemarket, the fallout from Covid was across the population.
He said the older demographic had been less impacted by what has happened because they are on better salaries, have greater job security and generally have lower mortgages.
McLaughlin said the biggest challenge for borrowers at the moment is non-discretionary debt, and the flexibility being able to borrow money provides can help in times of need.
Monday: NZ nears trillion-dollar debt burden
Tuesday: Government debt: Are higher taxes inevitable?
Thursday: Student debt: How big? How bad?
Tom Raynel is a multimedia business journalist for the Herald, covering small business, retail and tourism.