‘Crippling’ debt
Struggling households owe $37million as Covidhits economy
Tauranga residents seeking budget advice have accumulated more than $37 million in debt as the economic impact of Covid-19 on households worsens.
The latest Priority One Economic Monitor report shows Tauranga Budget Advisory Service clients had a collective total of $37m of total debt for September 2020 – with 72 per cent of that owed to banks, finance companies or other consumer lenders.
Almost $6m – or 16 per cent – was owed to Government departments or agencies and the remaining 12 per cent, or $4m, was owed to retailers, family or friends, utilities, landlords, debt collectors, motor vehicle repairers, local government and health services.
Tauranga Budget Advisory Service manager Shirley Mccombe said the total debt had grown from $34m in July – and total mortgage debt crept up from $15.4m in July to $16.5m in September.
She warns the pressure on households is likely to increase.
More than 1000 people sought help to feed their families during September and that is expected to rise in the New Year as families grapple with the cost of Christmas, holidays and back-to-school costs.
“This year, many will enter this expensive time of year well behind the eight-ball,” Mccombe said.
“October has long concerned me as we saw the end of Winter Energy Payments and mortgage “holidays” and subsidies came to an end for some.” Mccombe said the rise in debts suggested people were getting behind in meeting repayments and borrowing more, and she encouraged people to seek help earlier rather than later.
Sociallink general manager Liz Davies said debt could be “crippling”.
“Once you’re in it, it can be difficult to get out of it. It holds people back from being able to move on and get out of poverty.”
The $37m, divided by 415 clients, meant an average of about $89,000 a person, which Davies said was “terrifying”.
“That’s a huge amount of debt for one small group of people to be carrying.”
Davies said things were going to come to a head in January.
“It is always a stressful time but I think it is going to be far more so then, because the wage subsidies are gone and people on the benefit go back to the normal amount, which is hard to live on.
“It is really concerning.”
She said the stress can also impact people’s mental health.
In the last few months, Davies said many social agencies were seeing a rise in the number of people seeking help, and they were expecting numbers to keep increasing.
“I think waiting lists are already quite high for many services.”