Company Liquidations Surge 26% Despite Positive Credit Trends

The number of company liquidations in New Zealand has risen by a striking 26 percent compared to the previous year, even as credit trends show signs of improvement. This increase comes in the wake of intensified tax debt collection following a more lenient approach during the Covid-19 pandemic. According to credit reporting service Centrix, there has been a 12 percent reduction in customers with debt arrears from July to August 2023, reflecting a 1.8 percent decrease year-on-year.

Monika Lacey, chief operating officer of Centrix, noted that consumer arrears have improved overall. She stated, “Consumer arrears, year on year have improved, and that’s a trend which is good. And if we start to see consumer sentiment improve, then that should flow through into businesses which will be a really positive outcome for New Zealanders.”

Demand for credit is also on the upswing, with consumer credit demand increasing by 5.6 percent compared to last year. The growth has been particularly robust in personal loan applications, which reached their highest level since December 2024. Lacey highlighted that delinquencies over 90 days have now decreased for the fourth consecutive month, and mortgage inquiries surged by 10.6 percent, largely driven by increased refinancing activity.

Despite these positive indicators, company insolvencies remain a significant concern, accounting for nearly 70 percent of all liquidation applications, a stark contrast to the 30-40 percent range seen during the pandemic years. Lacey explained that the current rise in liquidation activity is a reflection of the low levels of arrears recorded during the Covid era, when the credit sector adopted a softer approach to managing bad debts.

“This liquidation activity, whether related to the Inland Revenue Department or not, is what we would call a lag indicator,” she added. Lacey warned that the effects of current arrears would take time to filter through the system. “While challenges remain and the economy is still operating below potential, the improvement in arrears, strengthening mortgage performance, and rising credit demand all suggest consumers and businesses could be beginning to regain confidence.”

Sector Performance and Regional Trends

Business conditions are also indicating gradual improvement, even with company liquidations rising. Lacey noted that the rate of increase in liquidations has eased recently, with sectors such as agriculture, mining, and information media showing more favorable liquidation trends. Additionally, credit defaults are declining in construction, retail, and transportation, which reflects early signs of economic recovery.

Regionally, consumer credit arrears vary significantly across New Zealand. The South Island has reported arrears below the national average, though some areas have seen notable increases. For example, Wairoa recorded a rise of 17.4 percent, followed closely by Kawerau at 17 percent and Gisborne with a 16 percent increase. Other regions such as South Waikato, Ruapehu, and Opotiki also reported similar figures.

Financial hardship cases have declined, with volumes reducing over the past few months from a peak in November 2022. Notably, 44 percent of these hardships are related to difficulties with mortgage payments, while 29 percent pertain to credit card debt. Personal loan hardships have surged by 36 percent year-on-year, now accounting for 19 percent of all hardship cases.

The current landscape presents a mixed picture for New Zealand’s credit markets, with signs of recovery accompanied by ongoing challenges. As businesses and consumers navigate this complex environment, the hope remains that the recent positive trends in credit and arrears will translate into sustained economic stability.