The strain of the recession, Canterbury earthquakes, and a rise in client referrals from government departments has left the Salvation Army's welfare services running at full capacity and close to breaking point, the charity group has warned.

Caseloads for South Island Salvation Army social workers have jumped by more than 270 per cent over the last four years, while welfare services across the country, including food banks and budget counselling, have soared by 70 per cent and 189 per cent respectively since the start of the recession in 2008, the organisation says.

As the group goes into its annual Red Shield Appeal, Salvation Army Secretary for Social Services Major Pam Waugh said this year's appeal was "the most critical in decades".

"The New Zealand public has always been an equal partner in the work we do in our most deprived neighbourhoods," she said.


"This year will be the most critical Salvation Army annual appeal in decades if we are to maintain current levels of service."

Welfare policy changes later this year, and current changes at Housing New Zealand, are expected to bump up demand for budgeting, social work services and emergency housing.

At the same time, individual welfare centres applying for community trust grants have seen the amounts available decline in recent years. The Government's Community Response Fund - established to assist NGOs cope with the rising tide of demand during and after the recession, and increased referrals for budgeting from Work and Income and Housing New Zealand - was "insufficient" and about to be disestablished, Major Waugh said.

The real pressures fell on both beneficiary and working families unable to cope with insufficient incomes, she said.

They were easily nudged into a spiral of crushing debt by unexpected costs, medical bills, power price increases, school fees, or rent rises - manageable for most households, but potentially catastrophic for fragile family budgets.

"No matter how frugal these families are, parents face the tough choices of paying the rent - often eating up 70 per cent or more of the household budget - or feed the family for the week, pay school costs or the power," Major Waugh said.

"If food wins over rent, then they face eviction and homelessness, and this is what we are seeing daily."

Evictions, overcrowded and substandard accommodation, declining health, increasing family violence and the use of alcohol, drugs or gambling to escape the constant strain were often the downstream results of unmanageable debt.

With a stagnant job market combined with increasing living costs, welfare centre staff were reporting a growing desperation and despondency among clients, Major Waugh said.

In recent years, some centres have reported a rise in the number of clients losing hope of escaping their dire circumstances and raising the subject of suicide.

One centre reported that some teenage children of clients had considered suicide, including one who entered into a suicide pact with his mother in the lead-up to their eviction.

The Canterbury earthquakes had increased pressure on welfare services, not just locally, but right across the South Island.

Salvation Army head of social services for the South Island Major Mike Allwright said his welfare centres were running at full steam to maintain the current level of services.

He expected no let-up for the next two years at least because of the sluggish economy and the growing housing crisis in the Christchurch region and continuing pressure on families affected by the earthquakes.

"Prior to the earthquakes, more and more families were coming to us with increasingly complex problems relating to job losses, reduced work hours and the resulting debt," Major Allwright said.

"Following the earthquakes, demand has soared, including a growing number of middle income-earners affected by the quakes."

While the Canterbury quakes had stretched local Salvation Army services to their limits, affected residents fleeing to other South Island towns - many leaving with only what they could fit in their cars - added unprecedented levels of demand on many centres.

Towns and cities like Timaru, Nelson, Blenheim, Ashburton and Alexandra had seen significant increases in demand for services, driven by the recession and the earthquakes.