Increase in pressure on household budgets across New Zealand as consumers cut back on discretionary spending
McLaughlin said he was confident that consumers were now getting on top of it.
'I think there's just that little blip where there's been a bit of an increase in pressure on the household budget.'
Meanwhile, mortgage arrears fell for the second consecutive month in June to 21,600, albeit just 300 fewer than in May.
McLaughlin said reductions in the Official Cash Rate (OCR) were starting to have an impact on mortgage arrears.
'We're finding interest rates are returning to a lower base than they have been … that has enabled mortgage holders to maintain their payments.
'With 79% of mortgages due to be repriced over the next 12 months, many borrowers may benefit from lower rates.
'I think we will see an ongoing impact on that, but what we're seeing today has been somewhat negated by the increase in the non-discretionary spending,' he said.
'Increases in rates, insurance and power does make it very hard to get the benefit out of those reductions in interest rates.'
Since August last year, the OCR has been cut by 225 basis points (bps).
The number of accounts reported in financial hardship in June was 14,450, down 550 from the prior month, Centrix said.
Year on year, financial hardships increased 7.1%, but the rate of growth has eased in recent months.
Elevated stress for small businesses
McLaughlin said small businesses were facing elevated levels of mortgage stress, with many relying on home equity to fund and sustain operations.
'We're really quite concerned about that. Consumer spending is still quite cautious, and I think that's having a flow-on impact into the cash flow on those small businesses.
'Consequently, we are seeing quite a rise year on year with liquidations and with company arrears.'
Overall, company liquidations rose 26% year on year in June, with the hospitality sector now the second-largest industry contributing to liquidations.
In the 12 months to June, 288 hospitality businesses were placed into liquidation, up from 199 the previous year.
Hospitality businesses are more than twice as likely to fail as the typical New Zealand business.
'This is a clear sign that the industry continues to struggle with rising operating costs and shifting consumer spending patterns,' McLaughlin said.
Construction remains the hardest-hit industry, with 755 companies liquidated in the past year – an increase of 48% compared with the previous year.
Recent figures from insolvency specialist firm McDonald Vague show a spike in Inland Revenue-enforced liquidations.
In June, the tax agency made up 50 of the 71 applications for the month, while in May it accounted for 70 out of 99.
IRD applications to wind up companies totalled 802 for the last financial year (12 months to June 2025), up from 586 in the year prior and more than triple that of 2022 (223).
Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.
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NZ Herald
2 days ago
- NZ Herald
I've got cancer so how should I invest my KiwiSaver?
True, you miss out on higher average returns. But you don't need the worry that the markets might be down at the very time you might have to withdraw. If anything, you should perhaps move all your money into a lowest-risk defensive fund. These funds, sometimes called cash funds, typically invest in bank term deposits and the like. Investors' balances usually just keep growing steadily. It's slow but smooth sailing. But if you want to be 'in the market' to some extent, your current mix is fair enough. And perhaps you could encourage other family members to take a bit of risk with their KiwiSaver choices. Note, though, that you may not be able to withdraw your KiwiSaver money when you want to. Inland Revenue says your health reason has to be either: 'An illness, injury or disability that permanently affects your ability to work or poses a risk of death. 'A life-shortening congenital condition that lowers your life expectancy below the age of eligibility for New Zealand Superannuation (currently 65).' Some people have been turned down because they don't quite fit the criteria. You can read about a woman in a similar situation to you on the Financial Services Complaints website, here: You might want to ask your provider about your eligibility before you count on it. I hope the time ahead of you goes as well as possible. Yes, but what about mortgages? Q: We hear much about the need to increase retirement savings, compulsory contributions to KiwiSaver etc – often from obviously self-interested providers. Have you seen any analysis about whether more people are retiring with mortgage debt who wouldn't have previously, or more debt than they would have had if they hadn't been contributing so much to savings? Is everybody truly better off at retirement? It's always presented as if it is a pure win. A: You raise an interesting point. It must be true that at least some contributions to KiwiSaver would otherwise have gone into reducing mortgages or other debt. While it sounds good to reach 65 with, say, $100,000 in KiwiSaver, nothing is gained if the person owes $100,000 more on their mortgage. Actually, that's not quite accurate. Because of the extra KiwiSaver input from the Government and employers, our person's KiwiSaver balance would probably be higher than the extra mortgage debt. But still, encouraging people – or forcing them by compulsion – to increase their KiwiSaver contributions would probably make people better off at retirement only if there are added KiwiSaver incentives. And they need to be genuine incentives, not increased employer contributions – as in this year's Budget – that Treasury assumes will largely come out of people's future pay rises. There doesn't seem to be any research specifically on this issue. NZIER says 2022 research shows 66% of people 65 and over own their homes mortgage-free, 13% have a mortgage and 20% rent. It adds: 'Less than half of Māori seniors and about one-quarter of Pacific seniors own their homes outright.' It also says: 'The number of people 65 and over with mortgage debt has grown from 118,000 in 2018 to 134,000 in 2022.' Associate professor Susan St John, of the University of Auckland's Pensions and Intergenerational Equity (PIE) research hub, doesn't link that trend to KiwiSaver. 'While I think that we see more people coming into retirement renting, or with a mortgage, I don't think there is evidence to attribute that to KiwiSaver contributions.' However, Treasury seems to disagree. It assumes about 80% of the 2025 Budget increase in employee contributions to KiwiSaver 'will come from a redirection of other forms of saving (eg, lower mortgage repayments or contributions to other investments)'. Either way, St John sums up the situation: 'Saving for retirement should not be viewed as an alternative to home ownership. It may mean that homes have to be more modest. It may mean governments have to increase attractiveness with subsidies rather than reduce them.' Hear, hear! Tax break for homeowners? Q: In a Q&A last week you pointed out that the mortgage interest rate was, say, 5.5% and that the return on savings is 'unlikely to be anywhere near 5.5%' – after tax and fees. True indeed. However, the equation is probably even worse. Mortgage interest is paid with tax-paid money – so if the person's top tax marginal rate is, say, 33%, the 5.5% mortgage rate is really 8.2%. You need to earn $8200 to have the $5500 after tax to pay the interest on $100,000. The mortgage interest rate is always way worse than it looks. Unfortunately, mortgage interest is a case of the miracle of compound interest – but in reverse. A: I think your point is that mortgage interest is not tax-deductible in New Zealand. A 2023 OECD report on tax relief for home ownership lists 17 countries as giving some kind of tax relief for homeowners' mortgage interest. They are Austria, Belgium, Chile, Colombia, Denmark, Estonia, Finland, Iceland, Italy, Luxembourg, Mexico, Netherlands, Portugal, Russia, Slovak Republic, Sweden and the United States. Should New Zealand do the same? Wikipedia points out: 'Most economists believe mortgage interest deduction is bad policy and is counterproductive. They note that it increases inequality, is an unnecessary market distortion, and contributes to housing unaffordability.' While the idea has strong appeal for homeowners, New Zealand doesn't really need to further encourage home ownership, which is already overrated as the only way to do well financially. Nor do we need more tax dollars flowing towards generally better-off people. So I'm afraid I'm not on that particular bandwagon! 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Here are the KiwiSaver providers that have told the Retirement Commission, in its regular services survey, that several or all of their funds are 'passively managed in their entirety and track an index': AMP, InvestNow, Kernel, Koura, Sharesies, SuperEasy and SuperLife, Also, NZ Funds' Balanced Fund is passive. Of these providers, NZ Funds got the highest score for services. Then came AMP, SuperLife, Koura, Kernel, Sharesies and, in a draw for the bottom slot were InvestNow and SuperEasy. But of course many of their services might not interest you. If there's a particular issue for you – perhaps ease of deposits or withdrawals – you can always ask providers if they offer it. Email or phone them, and if they don't reply within a few days, cross them off the 'good services' list. You can compare the different funds' fees using the Smart Investor tool on Or use Sorted's KiwiSaver Fund Finder to get an estimate of the total fees you will pay in each fund until you retire. What if you want to invest outside KiwiSaver? Many of the above providers also offer non-KiwiSaver funds. And Smart Investor also ranks fees on non-KiwiSaver managed funds. Another option is to use overseas-based funds. But that introduces complications with tax, settling estates and so on. It's much simpler to use a New Zealand-based fund that invests in overseas indexes. Many baskets? Q: Interesting stuff in last week's column about low fees and index funds. I note you do though also emphasise diversification. I recently switched from a major bank to a fund that allows me to split my KiwiSaver over several providers. So I can invest with Generate, Milford, Pathfinder and Nikko to name but four, and can do so in a mixture of conservative, balanced and growth funds. Thus my eggs go into many baskets. The trade-off is of course higher fees. Would it be better to go with a pure index fund that has low fees? I like Buffett's idea of 20% bonds and 80% index funds for people like me who are total amateurs. Which KiwiSaver provides this option? A: Several KiwiSaver providers enable you to invest in a range of funds run by other providers. And it's true that would give you further diversification. But that comes at the price of simplicity. And you won't necessarily get a higher total after-fees return, or less volatility. The providers you name tend to offer actively managed funds, as opposed to the passive index funds discussed above. And their fees are almost always higher, sometimes a lot higher. In any given year, some actively managed funds will perform better than the always middle-of-the-road passive funds, while some will do worse. But over time, it doesn't tend to be the same ones that outperform. Looking at what has done well so far doesn't guarantee their success will continue. Passive funds, with their lower fees, tend to be the best bet. 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But if you're having anything less than a financially comfortable retirement, it doesn't make sense to tie up all the money in a property when you could be gradually spending the proceeds from selling it, along with returns earned on that money in the meantime. On your first sentence, I've looked through recent columns and I don't think I've said that. I have, though, written that many new landlords find their expenses exceed their rental income, so they have to top up mortgage payments. Presumably they hope this imbalance will ease over time. But my guess is that many also hope to sell at a gain. Exempt employers Q: The Financial Markets Authority administers the register of exempt employers of KiwiSaver. The full list is available to view on the FMA website. A: You're right. You can see the list here: However, that list includes only employers who had qualifying employee superannuation schemes back in the early days of KiwiSaver, before November 2009, says the FMA. 'A scheme offered to employees by the employer had to have a minimum contribution rate of 4% of gross base salary of the member, which could be from either the member or the employer or a combination of both. 'Today only a new employee who joins the employment of an employer who holds exempt employer status and who is not already a KiwiSaver member would be covered by these provisions.' The FMA list does not include employers discussed in last week's Q&A, such as an employer that is not a New Zealand resident or does not carry on a business 'from a fixed establishment in NZ'. Mary Holm, ONZM, is a freelance journalist, a seminar presenter and a bestselling author on personal finance. She is a director of Financial Services Complaints Ltd (FSCL) and a former director of the Financial Markets Authority. Her opinions do not reflect the position of any organisation in which she holds office. Mary's advice is of a general nature, and she is not responsible for any loss that any reader may suffer from following it. Send questions to mary@ Letters should not exceed 200 words. We won't publish your name. Please provide a (preferably daytime) phone number. Unfortunately, Mary cannot answer all questions, correspond directly with readers, or give financial advice.
NZ Herald
3 days ago
- NZ Herald
Auckland cafe chain Little and Friday racked up sizeable tax debt before liquidation
Earlier this year, Evans was trespassed from her Takapuna premises by her landlord over outstanding rent. Little and Friday was placed into liquidation on June 27, with the Official Assignee appointed liquidator by the High Court. According to the first liquidator's report, Little and Friday owes Inland Revenue $639,389.19. Unsecured creditors, including ASB Bank, are owed $763,391.76. The Official Assignee's liquidator's report said attempts to contact Evans had so far been unsuccessful. 'The cause of liquidation appears to relate to a failure to account for tax obligations. The liquidator has made attempts to contact the director, Kim Evans, but to date has received no response to any correspondence … 'The liquidator will seek to interview the director and obtain the company's records, including a completed statement of affairs, to assess the company's assets and liabilities.' The liquidator expected its investigations to be completed with 12 months. Evans is the sole director and shareholder of Little and Friday, according to Companies Office records. The Insolvency and Trustee Service (ITS), or Official Assignee, acts as the court's default liquidator when no other firms take on an appointment. The ITS has experienced a significant jump in its workload as Inland Revenue ramps up its debt enforcement. The tax agency accounted for 70% of all winding-up applications in May and June, according to insolvency specialist firm McDonald Vague. The hospitality sector has faced significant challenges in recent years, in part due to reduced turnover and rising costs resulting from Covid-19 lockdowns and recession. Last month, Auckland cafe Kind closed its doors, citing spiralling costs and excessive rent. The cafe was a favourite of Dame Jacinda Ardern, who inspired the name. Recent Restaurant Association data showed total industry sales for the first quarter of the year were flat, rising just 1% compared to the same period last year. Restaurant Association chief executive Marisa Bidois said the summer trading period was softer than expected for many operators. 'Long-standing challenges like high fixed costs, wage pressure and staff shortages continue to weigh heavily. 'While inflation may be easing on paper, our members are still feeling significant cost strain on the ground.' Cameron Smith is an Auckland-based business reporter. He joined the Herald in 2015 and has covered business and sports. He reports on topics such as retail, small business, the workplace and macroeconomics.
RNZ News
3 days ago
- RNZ News
Consumer debt issues down, but liquidations up
Small businesses are experiencing elevated debt stress at more than double the rate of non-business owners. Photo: 123RF Consumers are getting on top of their debts, but it is a different story for small businesses, with liquidations on the rise. Credit reporting firm Centrix said June's data paints a complex picture, with a slight year-on-year improvement in arrears, while small businesses were experiencing elevated debt stress at more than double the rate of non-business owners. The June report indicated the number of individuals behind on payments in June fell by 7000 to 478,000, representing 12 percent of the credit-active population. Mortgage arrears fell 1.4 percent with 21,600 home loans past due, while mortgage enquiries surged by nearly 17 percent, with 79 percent of mortgages due to be repriced over the next 12 months. On the business front, credit demand rose 8 percent year-on-year, with growth in retail and hospitality sectors (23 percent) and financial, insurance, arts, and recreation services (22 percent). However, company liquidations were up 26 percent year-on-year, with construction the leading contributor to liquidations, followed by hospitality which had overtaken property as the second-largest affected sector. "Small businesses continue to face significant challenges, particularly sole proprietors managing multiple ventures," Centrix managing director Keith McLaughlin said. "This group is experiencing elevated debt stress - more than double that of non-business owners - often relying on home equity to sustain operations." He said the latest data indicates global economic uncertainty continued to slow New Zealand's economic recovery, with persistent inflationary pressures and the ripple effects of international tariffs. "In light of these trends, it's crucial for Kiwi households and businesses to maintain a clear understanding of their financial health and seek guidance from trusted advisors to navigate the economic uncertainties ahead," McLaughlin said. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
