Keith McLaughlin: Centrix Managing Director on the easing number of arrears but increasing number of businesses liquidating

Consumers finances look to be recovering, but the relief has yet to pass on to businesses. 

The Centrix July Credit Indicator says arrears are easing slightly, with the cost of living also coming down.  

It shows 465,000 New Zealanders are behind on their payments, down 9,000 month-on-month.  

However, retail energy arrears rose 30% because of the winter months and the ongoing cost-of-living crisis.  

Centrix’s Managing Director Keith McLaughlin told Mike Hosking that the downwards trend in arrears indicates that households are getting back in control of their budgets and managing their money a lot better. 

Meanwhile, businesses are doing it tough, with company liquidations up 20% in 12 months. 

However, McLaughlin said, that’s not taking into account the hidden damage to businesses, in which around 50,000 businesses in the last month have just closed the door and walked away. 

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Episode Transcript

Speaker 1 (00:00):
Fresh quarterly data for you from Centrix this morning. Upside
Over all arrears of East year on year, they're still
up nine percent, but for the quarter of the East
in financial hardship it's increased by quite a bit more,
falling behind on mortgages and energy payment Centrics. Managing director
Keith McLoughlin's whether it's Keith morning to you, Good morning, Mike,
So sum it up good bad? Or are we treading water?
What's going on?

Speaker 2 (00:21):
Well, I said the text of the consumer's perspective, it's
very good. He's been a downward trend in areas basically
all of this calendar year, so it really indicates that
households are getting back in control of their budgets and
managing their money a lot better. And yeah, I think
they're just not spending the discretionary dollar that they used
to speed, So I think that that's good news. I

(00:41):
think from the company's side things they're still a bit
tight in their area there.

Speaker 1 (00:46):
When you talk well, you've got two stories of the companies.
One is that people aren't spending so they'll be squeezed,
and then you get those that are so squeezed they're
going into liquidation from a historical point of view, How
bad are liquidations at the moment?

Speaker 2 (00:59):
Well, they are bad. They're certain hard, and I've been
to the last four or five years, and I think
that's a little bit of a carryover from the easy
of pressure over the post COVID period to allow businesses
to get back on their feet. And yes, we are
seeing a significant increase in the number of companies that
are going into liquidation. I mean it's up nineteen percent
on where it was this time last year. But really

(01:21):
the hidden number in that is there's about fifty thousand
businesses in the last month that have just closed their
door and walked away. And that's the hidden damage that
we see to businesses.

Speaker 1 (01:31):
It's extraordinary, isn't it. Is this the worst it gets,
or is there more to come, or we just don't know.

Speaker 2 (01:36):
I think on the consumer side, I think it's going
to get better, no question about that. And I think
come September October will start to see consumer confidence come
back into the market and as a result of that,
hopefully an increase in spending, which will help some of
the businesses. But I think on the business side, we're
probably another two or three months of difficult times before
we start to see that flowsure of cash.

Speaker 1 (01:57):
What's actually happened on the consumer side, because I'm looking
increase in mortgage lending, so that that shows optimism. The
rates are still comparatively high. Have we just decided they
are what they are? We may as well go for it.

Speaker 2 (02:09):
Yes. I think what call people out was not the
fact that the interest rates are where they are today.
I think it was the speed in which they lifted
and a lot of households were caught for short as
far as that was concerned, didn't have time to adjust
their spending. I think now people have accepted it is
where it is. They're looking for some reduction, but in
the meantime they're going along okay. And I think really

(02:31):
the confidence and the whole commercial industry relies on consumer confidence. Yeah.
I think that's starting to creep back into the market now.

Speaker 1 (02:39):
Gee. That's encouraging to hear weld On Keith appreciate it
very much. Keith mcloughlin' Centric Managing Director with us this morning.
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