Nation of Debt: New Zealand sitting on half-trillion-dollar debt bomb


New Zealand is sitting on a half-a-trillion-dollar debt bomb and Kiwis are increasingly treating their houses like cash machines, piling on the debt as they watch the value of their properties soar.

Reserve Bank figures show household debt, excluding investment property, has risen 23 per cent in the past five years to $163.4 billion. Incomes have risen only 11.5 per cent.

Households are now carrying a debt level that is equivalent to 162 per cent of their annual disposable income – higher than the level reached before the global financial crisis.

Including property investment the total debt households owed as of April was $232.9 billion, according to the Reserve Bank.

Satish Ranchhod, a senior economist at Westpac Bank, says the main driver has been low interest rates.

“Continued low interest rates have sparked a sharp increase in household borrowing at a time when income growth has been very modest.”

And it’s housing loans where the growth has mainly come from.

Housing loan debt has risen 23.4 per cent to $132.83 billion. Student loans were up 22.9 per cent to $14.84 billion and consumer loans are up 16.6 per cent to $15.7 billion.

Ranchhod said much of the rising debt on housing was down to investors, as more people jumped into the property market on the back of rising house prices.

He also believed many people were using their home loans to make consumer purchases.

“We think a lot of the increase in lending on housing loans will also be an increase in spending … people feel wealthy when the value of their home goes up.”

Hannah McQueen, an Auckland financial coach and managing director of EnableMe, said she had seen three clients in the past week alone who had paid for a new car by using the equity in their home to increase their mortgage debt. “It’s definitely on the increase … People think, ‘I’m worth so much more now …'”


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