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Alarming increase in the rate of New Zealanders' personal debt

October 31, 2016
By Emma Crosby

At the beginning of October it was announced by the treasury that the level of debt New Zealanders are in has reached amber alert. People are borrowing more money now than they have since the year 2000, and household debts are now at a record high of 165 percent of the average household's disposable income.

According to ANZ economist Cameron Bagrie this is very bad news for the economy. In an interview with Radio NZ he stated that "When you borrow, you basically borrow from the future. But there is a limit as to how long you can play that card, because the more you borrow from the future, the less there is for the future."

This could lead us in a difficult position where people are unable to own their own homes, or even retire, because they have such high levels of debt that they haven't made any provisions for the future.

Households Left Vulnerable
For individuals that do not yet have an unmanageable amount of debt, these statistics should be considered as a warning. You cannot grow an economy on debt alone, and high levels of debt leave individual household vulnerable if the country experiences any economic downturn, no matter how significant.

The only silver lining alongside this news is that interest rates are continuing to fall, and they are not expected to rise again in the immediate future, meaning that the cost of paying for this debt has also fallen (from the 2008 figure of 14 percent of disposable income to today's figure of 9 percent of disposable income).

Until interest rates rise again, this means that the wider economic situation remains stable for individuals with a significant amount of debt. However this doesn't take into account any changes in personal circumstances (such as unemployment or significant unexpected expenses) which can send someone struggling with debt into a tail spin.

The Emotional Impact of Debt
The emotional impact of these statistics is significant: with more New Zealanders than ever struggling with debts that they often can't afford to pay back this can lead to negative health effects. These health effects can impact national employment rates and wider wellbeing.

Research has shown that debt of any level can lead to emotional and psychological problems. Stress and anxiety are common amongst individuals with problems, as are overwhelming feelings of hopelessness.

One study conducted by the University of Nottingham in the UK found that 29% of people with high debt stress also reported experiencing severe anxiety. In the most extreme cases, this can lead to long term depression, and the physical health problems (such as chronic fatigue and insomnia) that are often associated with this.

It is important to note that there is no benchmark level of debt that can lead to this kind of emotional and psychological anguish: for some people breaking point could be $500,000 of debt whilst for others $500 could lead to anxiety. Different people have different tolerances to debt, and you will have no way of knowing what your tolerance is until you reach it and need help and support.

Local Debt Support for Local People
Debt problems can and do happen to anyone, regardless of their job, socio-economic status or background. There is no shame in admitting that you have a problem with debt and that you need support.

If you are a Motueka resident struggling with personal debts then the Motueka Family Service Centre is available to offer help and support.

With a specialist coordinator available to provide one-to-one debt advice, this free and non-judgemental service can help you to understand your level of debt and where necessary can offer negotiation with creditors and ongoing support as you navigate your way to a more controllable level of debt, or even a debt-free life.

You can attend just one appointment, or a series of appointments, depending on the level of support you need. To find out more, contact the Motueka Family Service Centre on Phone: 528 0234.




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